Summary of MARTIN MARIETTA MATERIALS INC

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Third Quarter and Nine Months Ended September 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 building development. 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. The following presents an addition to the Corporation's critical accounting policies for the allocation of purchase price for acquisitions.
The Corporation's Board of Directors and management regularly review strategic long-term plans, which include potential investments in value-added acquisitions of companies that engage in similar businesses, would increase the Corporation's market presence and/or are related to existing markets of the Corporation. When an acquisition is completed, the Corporation's consolidated statement of earnings includes the operating results of the acquired business starting from the date of acquisition, which is the date that control is obtained. The purchase price is determined based on the fair value of assets given to and liabilities assumed from the seller as of the date of acquisition. The Corporation allocates the purchase price to the fair values of the tangible and intangible assets acquired and liabilities assumed as valued at the date of acquisition. Goodwill is recorded for the excess of the purchase price over the net of the fair value of the identifiable assets acquired and liabilities assumed as of the acquisition date. The allocation of the purchase price is a critical accounting policy because the estimation of fair values of acquired assets and assumed liabilities is judgmental and requires various assumptions. Further, the amounts and useful lives assigned to depreciable and amortizable assets versus amounts assigned to goodwill, which is not amortized, can significantly affect the results of operations in the period of and in periods subsequent to a business combination.

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• Level 2 - Observable inputs, other than quoted prices, for similar assets or liabilities in active markets

• Level 3 - Unobservable inputs are used to value the asset or liability. This includes the use of valuation models.

Level 2 fair values are typically used to value acquired inventories, machinery and equipment, and land. Additionally, Level 2 fair values are typically used to value assumed contracts that are not at market rates and assumed liabilities for asset retirement obligations, environmental remediation and compliance obligations, and contingencies.
Level 3 fair values are used to value acquired mineral reserves, mineral interests, and separately-identifiable intangible assets. The fair values of mineral reserves and mineral interests are determined using an excess earnings approach, which requires management to estimate future cash flows, net of capital investments in the specific operation and contributory asset charges. The estimate of future cash flows is based on available historical information and on future expectations and assumptions deemed reasonable by management, but is inherently uncertain. Key assumptions in estimating future cash flows include sales price, shipment volumes and costs. The present value of the projected net cash flows represents the fair value assigned to mineral reserves and mineral interests. The discount rate is a significant assumption used in the valuation model. The rate is selected based on the required rate of return that a hypothetical market participant would require if purchasing the acquired business combination, with an adjustment for the risk of the assets generating the projected cash flows.
The Corporation values separately-identifiable acquired intangible assets which may include, but are not limited to, noncompetition agreements, customer relationships and permits. The fair values of these assets are generally determined using a cost approach based on the estimated amount to purchase or replace the asset. Amortization periods are based on either the contractual rights or the expected useful life of the asset if not contractually specified.

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MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES FORM 10-Q For the Quarter Ended September 30, 2009 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Third Quarter and Nine Months Ended September 30, 2009
(Continued)
There is a measurement period after the acquisition date during which the Corporation may adjust the amounts recognized for a business combination. Any such adjustments are based on the Corporation obtaining additional information that existed at the acquisition date regarding the assets acquired or the liabilities assumed. Measurement period adjustments are generally recorded as increases or decreases to the goodwill recognized in the transaction. These adjustments are applied retroactively to the date of acquisition and reported retrospectively. The measurement period ends once the Corporation has obtained all necessary information that existed as of the acquisition date, but does not extend beyond one year from the date of acquisition. Any adjustments to assets acquired or liabilities assumed beyond the measurement period are recorded in earnings.
During 2009, the Corporation has invested $49.6 million in business combinations and allocated this amount to assets acquired and liabilities assumed.
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 nine months ended September 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 September 30, 2009
        MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
                             RESULTS OF OPERATIONS
             Third Quarter and Nine Months Ended September 30, 2009
                                  (Continued)
Gross Margin in Accordance with GAAP

                              Three Months Ended             Nine Months Ended
                                 September 30,                 September 30,
                              2009          2008           2009            2008

           Gross profit     $ 117,750     $ 151,574     $   277,936     $   366,378


           Total revenues   $ 488,311     $ 598,711     $ 1,328,737     $ 1,647,329


           Gross margin          24.1 %        25.3 %          20.9 %          22.2 %

Gross Margin Excluding Freight and Delivery Revenues

                                                  Three Months Ended                  Nine Months Ended
                                                    September 30,                       September 30,
                                                2009             2008              2009               2008

Gross profit                                  $ 117,750        $ 151,574        $   277,936        $   366,378


Total revenues                                $ 488,311        $ 598,711        $ 1,328,737        $ 1,647,329
Less: Freight and delivery revenues             (59,696 )        (73,049 )         (159,110 )         (199,708 )

Net sales                                     $ 428,615        $ 525,662        $ 1,169,627        $ 1,447,621


Gross margin excluding freight and
delivery revenues                                  27.5 %           28.8 %             23.8 %             25.3 %

Operating Margin in Accordance with GAAP

                                   Three Months Ended             Nine Months Ended
                                      September 30,                 September 30,
                                   2009          2008           2009            2008

      Earnings from operations   $  89,215     $ 114,911     $   173,042     $   262,838


      Total revenues             $ 488,311     $ 598,711     $ 1,328,737     $ 1,647,329


      Operating margin                18.3 %        19.2 %          13.0 %          16.0 %

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

                                                  Three Months Ended                  Nine Months Ended
                                                    September 30,                       September 30,
                                                2009             2008              2009               2008

Earnings from operations                      $  89,215        $ 114,911        $   173,042        $   262,838


Total revenues                                $ 488,311        $ 598,711        $ 1,328,737        $ 1,647,329
Less: Freight and delivery revenues             (59,696 )        (73,049 )         (159,110 )         (199,708 )

Net sales                                     $ 428,615        $ 525,662        $ 1,169,627        $ 1,447,621


Operating margin excluding freight and
delivery revenues                                  20.8 %           21.9 %             14.8 %             18.2 %

Gross margin excluding freight and delivery revenues assuming production costs that cannot be inventoried due to operating below capacity for the quarter ended September 30, 2009 were at the level incurred for the quarter ended September 30, 2008 is a non-GAAP measure. The following reconciles gross profit as reported to the pro forma gross profit assuming production costs that cannot be inventoried due to operating below capacity for the quarter ended September 30, 2009 were at the level incurred for the quarter ended September 30, 2008. It also provides the calculation of gross margin excluding freight and delivery revenues based on the pro forma gross profit.

                                                                               Three Months Ended
                                                                               September 30, 2009
                                                                             (Dollars in Thousands)

Gross profit, as reported                                                   $                117,750
Add: 2009 production costs that cannot be inventoried due to operating
below capacity                                                                                21,310
Less: 2008 production costs that cannot be inventoried due to
operating below capacity                                                                     (13,232 )

Gross profit, pro forma                                                     $                125,828


Net sales                                                                   $                428,615


Gross margin excluding freight and delivery revenues assuming
production costs that cannot be inventoried for the quarter ended
September 30, 2009 were at the level incurred for the quarter ended
September 30, 2008                                                                              29.4 %

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• Earnings from operations of $89.2 million compared with $114.9 million in the prior-year quarter

• Earnings per diluted share of $1.23, compared with $1.57 for the prior-year quarter

• Consolidated gross margin excluding freight and delivery revenues of 27.5%

• Heritage aggregates product line pricing up 1.3% and volume down 22.1%

• Record quarterly earnings in Specialty Products and the Aggregates Midwest Division

• Energy costs down $24.5 million, or 40%, compared with the prior-year quarter

• Selling, general and administrative expenses down $4.8 million compared with the prior-year quarter

The following table presents net sales, gross profit, selling, general and administrative expenses and earnings (loss) from operations data for the Corporation and its reportable segments for the three months ended September 30, 2009 and 2008. In each case, the data is stated as a percentage of net sales of the Corporation or the relevant segment, as the case may be.
Earnings from operations include research and development expense and other operating income and expenses, net. Research and development expense for the Corporation was $0.1 million for the quarters ended September 30, 2009 and 2008. Consolidated other operating income and expenses, net, was income of $4.4 million and income of $1.2 million for the quarters ended September 30, 2009 and 2008, respectively.

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

                                                                 Three Months Ended September 30,
                                                             2009                                2008
                                                                     % of                                % of
                                                  Amount           Net Sales          Amount           Net Sales
                                                                      (Dollars in Thousands)
Net sales:
Mideast Group                                    $ 131,520                           $ 167,722
Southeast Group                                     87,938                             118,593
West Group                                         169,571                             193,004

Total Aggregates Business                          389,029              100.0          479,319              100.0
Specialty Products                                  39,586              100.0           46,343              100.0

Total                                            $ 428,615              100.0        $ 525,662              100.0


Gross profit:
Mideast Group                                    $  50,762                           $  70,933
Southeast Group                                      9,608                              21,911
West Group                                          44,811                              49,242

Total Aggregates Business                          105,181               27.0          142,086               29.6
Specialty Products                                  14,393               36.4           10,922               23.6
Corporate                                           (1,824 )                -           (1,434 )                -

Total                                            $ 117,750               27.5        $ 151,574               28.8


Selling, general & administrative expenses:
Mideast Group                                    $  10,755                           $  11,070
Southeast Group                                      7,107                               6,417
West Group                                          10,305                              11,065

Total Aggregates Business                           28,167                7.2           28,552                6.0
Specialty Products                                   2,343                5.9            2,501                5.4
Corporate                                            2,422                  -            6,681                  -

Total                                            $  32,932                7.7        $  37,734                7.2


Earnings (Loss) from operations:
Mideast Group                                    $  40,069                           $  60,957
Southeast Group                                      4,812                              13,013
West Group                                          36,207                              38,385

Total Aggregates Business                           81,088               20.8          112,355               23.4
Specialty Products                                  11,947               30.2            8,632               18.6
Corporate                                           (3,820 )                -           (6,076 )                -

Total                                            $  89,215               20.8        $ 114,911               21.9

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MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES FORM 10-Q For the Quarter Ended September 30, 2009 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Third Quarter and Nine Months Ended September 30, 2009
(Continued)
The Corporation's performance in the third quarter reflected both the difficult macroeconomic environment in which it is operating and its response to dealing with the challenges it is facing. The 1.3% increase in quarterly heritage aggregates pricing was achieved in spite of a 22.1% decline in third quarter heritage aggregates volume compared with the prior-year quarter. The Corporation continues to see slower progress with respect to the actual commencement of stimulus jobs than it had originally hoped for when the government-financed stimulus program was first announced, with wet weather in September, continuing into October, being a negative factor. A significant exception to that trend is Iowa where the Iowa Department of Transportation is expected to finish the majority of its stimulus work in 2009. Iowa's approach to stimulus projects, coupled with the Corporation's resulting performance in the geographic area, underscores the view that the combination of the Corporation's lean operating cost structure, together with even moderate volume recovery, provides an enormously powerful combination. Specifically, despite aggregates volume being down 15% quarter-on-quarter in Iowa, the Midwest Division reported record quarterly gross profit. This scenario exemplifies the type of performance that the Aggregates business expects to repeat in multiple markets as volume rebounds.
As expected, commercial construction activity remains weak, primarily in office and retail construction. Heavy industrial jobs, including alternative-energy construction projects, have sustained volume throughout the year; however, the Corporation's customers have reported a decrease in the number of heavy industrial construction jobs in their backlog or coming up for bid. Further, while little has changed during 2009 with respect to residential construction, indicators increasingly point to the beginning of a recovery in this sector. Overall heritage aggregates pricing increased 1.3% over the prior-year quarter. The Aggregates business continues to experience a wide range in pricing across its markets, from an increase of 12% in one market to a price decrease of 12% in another market, and other levels in between. Those areas experiencing pricing declines are typically markets where competitors, driven by the need for cash flow, are setting prices relative to their cash costs. The range of pricing is tighter for the year-to-date period, ranging from a price increase of 9% to a decrease of 4%. The majority of the Aggregates business' markets continue to report price increases for both the quarter and the year-to-date period, albeit at levels closer to historical averages, and management believes this is a testament to the strength of its markets and the industry fundamentals.

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         MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
                                   FORM 10-Q
                    For the Quarter Ended September 30, 2009
        MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
                             RESULTS OF OPERATIONS
             Third Quarter and Nine Months Ended September 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
                                                       September 30, 2009
                                                       Volume       Pricing
            Volume/Pricing Variance (1)
            Heritage Aggregates Product Line (2):
            Mideast Group                               (25.8 %)      5.7 %
            Southeast Group                             (23.7 %)     (4.2 %)
            West Group                                  (18.3 %)      2.3 %
            Heritage Aggregates Operations              (22.1 %)      1.3 %
            Aggregates Product Line (3)                 (20.8 %)      1.6 %



                                                      Three Months Ended
                                                         September 30,
                                                       2009          2008
                                                      (tons in thousands)
           Shipments
           Heritage Aggregates Product Line (2):
           Mideast Group                               11,270       15,192
           Southeast Group                              7,901       10,357
           West Group                                  16,145       19,768

           Heritage Aggregates Operations              35,316       45,317
           Acquisitions                                   660            -
           Divestitures (4)                                 9          129

           Aggregates Product Line (3)                 35,985       45,446

(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.

. . .