Summary of MARTIN MARIETTA MATERIALS INC

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Second Quarter and Six Months Ended June 30, 2009
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
OVERVIEW Martin Marietta Materials, Inc. (the "Corporation"), conducts its operations through four reportable business segments: Mideast Group, Southeast Group, West Group (collectively, the "Aggregates business") and Specialty Products. The Corporation's net sales and earnings are predominately derived from its Aggregates business, which processes and sells granite, limestone, and other aggregates products from a network of 289 quarries, distribution facilities and plants to customers in 30 states, Canada, the Bahamas and the Caribbean Islands. The Aggregates business' products are used primarily by commercial customers principally in domestic construction of highways and other infrastructure projects and for commercial and residential buildings. The Specialty Products segment produces magnesia-based chemicals products used in industrial, agricultural and environmental applications and dolomitic lime sold primarily to customers in the steel industry.
CRITICAL ACCOUNTING POLICIES The Corporation outlined its critical accounting policies in its Annual Report on Form 10-K for the year ended December 31, 2008, filed with the Securities and Exchange Commission on February 17, 2009.
RESULTS OF OPERATIONS
Except as indicated, the following comparative analysis in the Results of Operations section of this Management's Discussion and Analysis of Financial Condition and Results of Operations reflects results from continuing operations and is based on net sales and cost of sales.
Gross margin as a percentage of net sales and operating margin as a percentage of net sales represent non-GAAP measures. The Corporation presents these ratios calculated based on net sales, as it is consistent with the basis by which management reviews the Corporation's operating results. Further, management believes it is consistent with the basis by which investors analyze the Corporation's operating results given that freight and delivery revenues and costs represent pass-throughs and have no profit mark-up. Gross margin and operating margin calculated as percentages of total revenues represent the most directly comparable financial measures calculated in accordance with generally accepted accounting principles ("GAAP"). The following tables present the calculations of gross margin and operating margin for the three and six months ended June 30, 2009 and 2008 in accordance with GAAP and reconciliations of the ratios as percentages of total revenues to percentages of net sales (dollars in thousands):

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         MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
                                   FORM 10-Q
                      For the Quarter Ended June 30, 2009
        MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
                             RESULTS OF OPERATIONS
               Second Quarter and Six Months Ended June 30, 2009
                                  (Continued)
Gross Margin in Accordance with GAAP

                               Three Months Ended            Six Months Ended
                                    June 30,                     June 30,
                               2009          2008          2009           2008
            Gross profit     $ 111,778     $ 139,469     $ 160,254     $   214,614

            Total revenues   $ 465,989     $ 597,824     $ 841,041     $ 1,049,372

            Gross margin          24.0 %        23.3 %        19.1 %          20.5 %

Gross Margin Excluding Freight and Delivery Revenues

                                                  Three Months Ended                  Six Months Ended
                                                       June 30,                           June 30,
                                                2009             2008             2009              2008

Gross profit                                  $ 111,778        $ 139,469        $ 160,254        $   214,614


Total revenues                                $ 465,989        $ 597,824        $ 841,041        $ 1,049,372
Less: Freight and delivery revenues             (54,696 )        (71,407 )        (99,415 )         (126,674 )

Net sales                                     $ 411,293        $ 526,417        $ 741,626        $   922,698


Gross margin excluding freight and
delivery revenues                                  27.2 %           26.5 %           21.6 %             23.3 %

Operating Margin in Accordance with GAAP

                                    Three Months Ended            Six Months Ended
                                         June 30,                     June 30,
                                    2009          2008          2009           2008
       Earnings from operations   $  73,006     $ 104,883     $  83,896     $   147,741

       Total revenues             $ 465,989     $ 597,824     $ 841,041     $ 1,049,372

       Operating margin                15.7 %        17.5 %        10.0 %          14.1 %

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         MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
                                   FORM 10-Q
                      For the Quarter Ended June 30, 2009
        MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
                             RESULTS OF OPERATIONS
               Second Quarter and Six Months Ended June 30, 2009
                                  (Continued)
Operating Margin Excluding Freight and Delivery Revenues

                                                  Three Months Ended                  Six Months Ended
                                                       June 30,                           June 30,
                                                2009             2008             2009              2008

Earnings from operations                      $  73,006        $ 104,883        $  83,896        $   147,741


Total revenues                                $ 465,989        $ 597,824        $ 841,041        $ 1,049,372
Less: Freight and delivery revenues             (54,696 )        (71,407 )        (99,415 )         (126,674 )

Net sales                                     $ 411,293        $ 526,417        $ 741,626        $   922,698


Operating margin excluding freight and
delivery revenues                                  17.8 %           19.9 %           11.3 %             16.0 %

Operating margin excluding freight and delivery revenues and excluding nonrecurring items is a non-GAAP measure. The following table reconciles operating margin excluding freight and delivery revenues and excluding nonrecurring items to operating margin excluding freight and delivery revenues for the three and six months ended June 30, 2009 and 2008.

                                                   Three Months Ended June 30,                Six Months Ended June 30,
                                                   2009                   2008                 2009                2008
                                                                         (Dollars in Thousands)

Earnings from operations                      $       73,006         $      104,883        $     83,896         $   147,741
Add: Nonrecurring transaction costs and
property losses                                        2,943                      -               2,943                   -
Less: Gains on the exchange transaction
with Vulcan Materials Company                              -                 (7,188 )                 -              (7,188 )
Less: Gain on sale of land                                                                            -              (5,465 )

Earnings from operations excluding
nonrecurring items                            $       75,949         $       97,695        $     86,839         $   135,088


Total revenues                                $      465,989         $      597,824        $    841,041         $ 1,049,372
Less: Freight and delivery revenues                  (54,696 )              (71,407 )           (99,415 )          (126,674 )

Net sales                                     $      411,293         $      526,417        $    741,626         $   922,698


Operating margin excluding freight and
delivery revenues and excluding
nonrecurring items                                      18.5 %                 18.6 %              11.7 %              14.6 %

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• Consolidated gross profit margin excluding freight and delivery revenues of 27.2%, up 70 basis points over the prior-year quarter

• Earnings from operations of $73.0 million compared with $104.9 million in the prior-year quarter

• Earnings per diluted share of $0.86, compared with $1.51 for the prior-year quarter

• Heritage aggregates product line pricing up 3.7% and volume down 25.6%

• Energy costs down $27 million, or 45%, compared with the prior-year quarter

• Selling, general and administrative expenses down $5.3 million compared with the prior-year quarter

• Secured new bank financing in advance of April 2010 debt maturity

• Aggregates quarries acquired from CEMEX, Inc. in June 2009 fully integrated

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                                               Three Months Ended June 30,
                                           2009                          2008
                                                  % of                          % of
                                  Amount        Net Sales       Amount        Net Sales
                                                 (Dollars in Thousands)

     Net sales:
     Mideast Group               $ 124,820                     $ 168,898
     Southeast Group                92,463                       121,752
     West Group                    160,767                       190,562

     Total Aggregates Business     378,050           100.0       481,212           100.0
     Specialty Products             33,243           100.0        45,205           100.0

     Total                       $ 411,293           100.0     $ 526,417           100.0


     Gross profit:
     Mideast Group               $  44,966                     $  66,565
     Southeast Group                17,265                        19,508
     West Group                     38,320                        40,804

     Total Aggregates Business     100,551            26.6       126,877            26.4
     Specialty Products             10,286            30.9        12,398            27.4
     Corporate                         941               -           194               -

     Total                       $ 111,778            27.2     $ 139,469            26.5

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         MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
                                   FORM 10-Q
                      For the Quarter Ended June 30, 2009
        MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
                             RESULTS OF OPERATIONS
               Second Quarter and Six Months Ended June 30, 2009
                                  (Continued)

                                                                   Three Months Ended June 30,
                                                            2009                                2008
                                                                    % of                                % of
                                                  Amount          Net Sales          Amount           Net Sales
                                                                     (Dollars in Thousands)

Selling, general & administrative expenses:
Mideast Group                                    $ 11,127                           $  11,787
Southeast Group                                     6,665                               6,676
West Group                                         10,457                              11,179

Total Aggregates Business                          28,249                7.5           29,642                6.2
Specialty Products                                  2,332                7.0            2,537                5.6
Corporate                                           6,185                  -            9,860                  -

Total                                            $ 36,766                8.9        $  42,039                8.0


Earnings (Loss) from operations:
Mideast Group                                    $ 33,959                           $  61,437
Southeast Group                                    10,086                              13,441
West Group                                         29,580                              32,076

Total Aggregates Business                          73,625               19.5          106,954               22.2
Specialty Products                                  7,819               23.5            9,744               21.6
Corporate                                          (8,438 )                -          (11,815 )                -

Total                                            $ 73,006               17.8        $ 104,883               19.9

Given the economic climate, the second quarter was predictably difficult as management continued to guide the business through the worst recession since the 1930's. The 3.7% increase in heritage aggregates pricing was achieved despite a 25.6% decline in second quarter heritage aggregates volume compared with the prior-year quarter, which was exacerbated by weather. The extended economic downturn has significantly affected state budgets, and the Corporation is experiencing a more pronounced pullback in infrastructure construction spending than expected. In terms of aggregates shipments, May is historically the strongest month of the year. However, three of the Corporation's top five states, specifically, North Carolina, Georgia and Florida, experienced record rainfall, making this May the weakest month of the quarter, with shipments declining 30% compared with the prior-year period.
Commercial construction activity remains weak, primarily in office and retail construction. However, there has been a resurgence in alternative-energy construction projects, namely wind farms in Iowa, and the Corporation is benefiting from those projects as well as the continued strength of the farm economy through its position in the Midwest. Further, while little has changed at mid-year with respect to residential construction, indicators increasingly point to the beginning of a recovery in the second half of 2009.

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         MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
                                   FORM 10-Q
                      For the Quarter Ended June 30, 2009
        MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
                             RESULTS OF OPERATIONS
               Second Quarter and Six Months Ended June 30, 2009
                                  (Continued)
The following tables present volume and pricing data and shipments data for the
aggregates product line. Heritage aggregates operations exclude volume and
pricing data for acquisitions that were not included in prior-year operations
for the comparable period and divestitures.

                                                      Three Months Ended
                                                         June 30, 2009
                                                      Volume        Pricing
          Volume/Pricing Variance (1)
          Heritage Aggregates Product Line (2):
          Mideast Group                                (29.9 %)         5.6 %
          Southeast Group                              (27.2 %)         2.7 %
          West Group                                   (21.4 %)         4.4 %
          Heritage Aggregates Operations               (25.6 %)         3.7 %
          Aggregates Product Line (3)                  (25.5 %)         3.8 %



                                                      Three Months Ended
                                                           June 30,
                                                       2009          2008
                                                      (tons in thousands)
           Shipments
           Heritage Aggregates Product Line (2):
           Mideast Group                               10,511       15,001
           Southeast Group                              8,007       10,997
           West Group                                  15,445       19,647

           Heritage Aggregates Operations              33,963       45,645
           Acquisitions                                   137            -
           Divestitures (4)                                12          154

           Aggregates Product Line (3)                 34,112       45,799

(1) Volume/pricing variances reflect the percentage increase/(decrease) from the comparable period in the prior year.

(2) Heritage Aggregates Product Line excludes volume and pricing data for acquisitions that have not been included in prior-year operations for the comparable period and divestitures.

(3) Aggregates Product Line includes all acquisitions from the date of acquisition and divestitures through the date of disposal.

(4) Divestitures include the tons related to divested aggregates product line operations up to the date of divestiture.

The Aggregates business is significantly affected by seasonal changes and other weather-related conditions. Aggregates production and shipment levels coincide with general construction activity levels, most of which occurs in the spring, summer and fall. Thus, production and shipment levels vary by quarter. Operations concentrated in the northern United States generally experience more severe winter weather conditions than operations in the Southeast and Southwest. Excessive rainfall, and conversely excessive drought, can also jeopardize shipments, production and profitability. Because of the potentially significant impact of weather on the Corporation's operations, second quarter results are not indicative of expected performance for other interim periods or the full year.

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MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES FORM 10-Q For the Quarter Ended June 30, 2009 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Second Quarter and Six Months Ended June 30, 2009
(Continued)
Specialty Products' net sales were $33.2 million for the second quarter 2009 compared with $45.2 million for the prior-year period. The decrease in net sales is due to reduced dolomitic lime shipments to the steel industry and slowing magnesia chemicals sales consistent with declines in general industrial demand. The Specialty Products business has responded to this slowdown through workforce downsizing to match current demand, a reduction in required maintenance activities and limiting contract services. These measures, together with a decrease in the cost and consumption of natural gas, combined to expand gross profit margin by 350 basis points over the second quarter 2009 to 30.9%. Earnings from operations for the quarter of $7.8 million decreased $1.9 million compared with the prior-year quarter.
By maintaining its focus on operating performance and cost discipline, the Corporation expanded consolidated gross profit margin excluding freight and delivery revenues by 70 basis points over the same period in 2008 to 27.2%. The gross profit margin improvement was driven by a 3.7% increase in heritage aggregates pricing as well as an $87.4 million, or 22.6%, decline in consolidated cost of sales. The lower cost of sales was achieved despite expected increases in both depreciation and pension costs. Energy costs were down $27 million, or 45%, from the second quarter of 2008. A 58% decline in the cost of diesel fuel was the primary component.
The following presents a rollforward of the Corporation's gross profit (dollars in thousands):

       Consolidated gross profit, quarter ended June 30, 2008   $  139,469

       Aggregates Business:
       Pricing strength                                             17,801
       Volume weakness                                            (120,962 )
       Cost decreases, net                                          76,835

       Decrease in Aggregates Business gross profit                (26,326 )
       Specialty Products                                           (2,112 )
       Corporate                                                       747

       Decrease in consolidated gross profit                       (27,691 )

       Consolidated gross profit, quarter ended June 30, 2009   $  111,778

Selling, general and administrative expenses were down $5.3 million for the quarter compared with the 2008 second quarter. Personnel costs declined $2.6 million, after absorbing a $1.5 million increase in pension expense. The Corporation's objective continues to be to reduce selling, general and administrative spending after absorbing the pension expense increase expected this year.

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MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES FORM 10-Q For the Quarter Ended June 30, 2009 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Second Quarter and Six Months Ended June 30, 2009
(Continued)
Among other items, other operating income and expenses, net, includes gains and losses on the sale of assets; gains and losses related to certain accounts receivable; rental, royalty and services income; and the accretion and depreciation expenses related to Statement of Financial Accounting Standards No. 143, Accounting for Asset Retirement Obligations. For the second quarter, consolidated other operating income and expenses, net, was an expense of $1.8 million in 2009 compared with income of $7.6 million in 2008. Second quarter 2009 and 2008 consolidated other operating income and expenses, net, included several nonrecurring items. Second quarter 2009 included $1.7 million of transaction costs and $1.2 million of property losses. Second quarter 2008 results included a $7.2 million gain on the disposals of an idle facility north of San Antonio, Texas (West Group), and land in Henderson, North Carolina (Mideast Group) in connection with the exchange transaction with Vulcan Materials Company ("VMC").
For the second quarter, consolidated earnings from operations were $73.0 million in 2009, compared with $104.9 million in 2008. Consolidated operating margin excluding freight and delivery revenues was 17.8% for the second quarter of 2009 compared with 19.9% in the second quarter of 2008. Excluding the effects of the nonrecurring items recorded in other operating income and expenses, net, operating margin excluding freight and delivery revenues for second quarter of 2009 and 2008 would have been 18.5% and 18.6%, respectively.
Interest expense was $18.7 million for the second quarter 2009 as compared with $19.3 million for the prior-year quarter. The decrease primarily resulted from lower outstanding borrowings during the three months ended June 30, 2009 as compared with the prior-year quarter.
In addition to other offsetting amounts, other nonoperating income and expenses, net, are comprised generally of interest income and net equity earnings from nonconsolidated investments. Consolidated other nonoperating income and expenses, net, for the quarter ended June 30, was income of $1.3 million in 2009 compared with income of $0.4 million in 2008, primarily as a result of higher interest income and a higher gain on foreign currency transactions.

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MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES FORM 10-Q . . .