Martin Marietta Materials - 10-Q quarterly report FY

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)


þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2007

OR


o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 1-12744

MARTIN MARIETTA MATERIALS, INC.

(Exact name of registrant as specified in its charter)


North Carolina		56-1848578

(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)

2710 Wycliff Road, Raleigh, NC		27607-3033

(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code 919-781-4550


Former name:		None

		Former name, former address and former fiscal year,
		if changes since last report.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large accelerated filer þ Accelerated filer o Non-accelerated filer o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o No þ

Indicate the number of shares outstanding of each of the issuer’s classes of Common Stock, as of the latest practicable date.


Class		Outstanding as of October 26, 2007

Common Stock, $0.01 par value		41,859,683

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 2007


		Page
Part I. Financial Information:

Item 1. Financial Statements.

	Consolidated Balance Sheets —
	September 30, 2007, December 31, 2006 and September 30, 2006		3

	Consolidated Statements of Earnings —
	Three and Nine Months Ended September 30, 2007 and 2006		4

	Consolidated Statements of Cash Flows —
	Nine Months Ended September 30, 2007 and 2006		5

	Consolidated Statement of Shareholders’ Equity		6

	Condensed Notes to Consolidated Financial Statements		7

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.			17

Item 3. Quantitative and Qualitative Disclosures About Market Risk.			35

Item 4. Controls and Procedures.			36

Part II. Other Information:

Item 1. Legal Proceedings.			37

Item 1A. Risk Factors.			37

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.			37

Item 6. Exhibits.			38

Signatures			39

Exhibit Index			40
Exhibit 31.01
Exhibit 31.02
Exhibit 32.01
Exhibit 32.02

Page 2 of 40

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

Item 1. Financial Statements.

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS


	September 30,			December 31,			September 30,
	2007			2006			2006
	(Unaudited)			(Audited)			(Unaudited)
	(Dollars in Thousands, Except Per Share Data)
ASSETS
Current Assets:
Cash and cash equivalents	$	26,417		$	32,282		$	22,829
Accounts receivable, net		312,265			242,399			293,702
Inventories, net		285,252			256,287			244,537
Current portion of notes receivable, net		1,912			2,521			2,299
Current deferred income tax benefits		42,118			25,317			16,022
Other current assets		22,896			33,548			28,900

Total Current Assets		690,860			592,354			608,289


Property, plant and equipment		2,924,336			2,739,327			2,695,560
Allowances for depreciation, depletion and amortization		(1,518,620	)		(1,443,836	)		(1,416,194	)

Net property, plant and equipment		1,405,716			1,295,491			1,279,366

Goodwill		574,667			570,538			570,336
Other intangibles, net		9,850			10,948			12,624
Noncurrent notes receivable		8,801			10,355			10,713
Other noncurrent assets		32,056			26,735			51,368


Total Assets	$	2,721,950		$	2,506,421		$	2,532,696


LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Bank overdraft	$	120		$	8,390		$	9,720
Accounts payable		92,845			85,237			89,650
Accrued salaries, benefits and payroll taxes		22,853			25,010			24,675
Pension and postretirement benefits		9,285			6,100			6,260
Accrued insurance and other taxes		38,578			32,297			46,436
Income taxes and current reserves for uncertain tax positions		30,630			—			10,253
Current maturities of long-term debt, commercial paper and line of credit		78,069			125,956			137,606
Other current liabilities		44,251			32,082			35,095

Total Current Liabilities		316,631			315,072			359,695

Long-term debt		1,050,705			579,308			579,824
Pension, postretirement and postemployment benefits		95,287			106,413			97,222
Noncurrent deferred income taxes and reserves for uncertain tax positions		165,592			159,094			144,540
Other noncurrent liabilities		106,452			92,562			89,345

Total Liabilities		1,734,667			1,252,449			1,270,626


Shareholders’ Equity:
Common stock, par value $0.01 per share		418			448			450
Preferred stock, par value $0.01 per share		—			—			—
Additional paid-in capital		53,314			147,491			186,611
Accumulated other comprehensive loss		(30,071	)		(36,051	)		(17,187	)
Retained earnings		963,622			1,142,084			1,092,196

Total Shareholders’ Equity		987,283			1,253,972			1,262,070


Total Liabilities and Shareholders’ Equity	$	2,721,950		$	2,506,421		$	2,532,696

See accompanying condensed notes to consolidated financial statements.

Page 3 of 40

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2007			2006			2007			2006
	(In Thousands, Except Per Share Data)
	(Unaudited)

Net Sales	$	548,923		$	527,381		$	1,497,318		$	1,466,649
Freight and delivery revenues		71,294			74,272			179,412			204,042

Total revenues		620,217			601,653			1,676,730			1,670,691


Cost of sales		381,557			378,094			1,057,761			1,078,528
Freight and delivery costs		71,294			74,272			179,412			204,042

Total cost of revenues		452,851			452,366			1,237,173			1,282,570


Gross Profit		167,366			149,287			439,557			388,121

Selling, general & administrative expenses		36,439			35,254			119,021			108,563
Research and development		170			175			559			479
Other operating (income) and expenses, net		(6,191	)		(2,154	)		(11,520	)		(9,358	)

Earnings from Operations		136,948			116,012			331,497			288,437

Interest expense		17,240			10,070			45,142			29,754
Other nonoperating (income) and expenses, net		(1,273	)		239			(5,114	)		(2,163	)

Earnings from continuing operations before income tax expense		120,981			105,703			291,469			260,846
Income tax expense		31,110			29,199			86,246			77,673


Earnings from continuing operations		89,871			76,504			205,223			183,173
Gain (Loss) on discontinued operations, net of related tax expense (benefit) of $402, $(156), $867 and $16, respectively		395			(344	)		985			(217	)

Net Earnings	$	90,266		$	76,160		$	206,208		$	182,956


Net Earnings (Loss) Per Common Share:
Basic from continuing operations	$	2.15		$	1.69		$	4.78		$	4.02
Discontinued operations		0.01			(0.01	)		0.02			—

	$	2.16		$	1.68		$	4.80		$	4.02


Diluted from continuing operations	$	2.11		$	1.66		$	4.71		$	3.93
Discontinued operations		0.01			(0.01	)		0.02			—

	$	2.12		$	1.65		$	4.73		$	3.93


Cash Dividends Per Common Share	$	0.345		$	0.275		$	0.895		$	0.735


Reconciliation of denominators for basic and diluted earnings per share computations:
Basic weighted average number of common shares		41,817			45,275			42,931			45,561
Effect of dilutive employee and director awards		662			846			704			947

Diluted weighted average number of common shares and assumed conversions		42,479			46,121			43,635			46,508

See accompanying condensed notes to consolidated financial statements.

Page 4 of 40

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS


	Nine Months Ended
	September 30,
	2007			2006
	(Dollars in Thousands)
	(Unaudited)

Net earnings	$	206,208		$	182,956
Adjustments to reconcile net earnings to cash provided by operating activities:
Depreciation, depletion and amortization		111,087			102,694
Stock-based compensation expense		16,363			9,679
Gains on divestitures and sales of assets		(9,192	)		(6,805	)
Deferred income taxes		1,691			(3,248	)
Excess tax benefits from stock-based compensation transactions		(20,153	)		(11,343	)
Other items, net		(2,648	)		(3,347	)
Changes in operating assets and liabilities, net of effects of acquisitions and divestitures:
Accounts receivable, net		(70,292	)		(68,663	)
Inventories, net		(29,842	)		(21,931	)
Accounts payable		6,824			(3,796	)
Other assets and liabilities, net		62,727			33,526


Net cash provided by operating activities		272,773			209,722


Investing activities:
Additions to property, plant and equipment		(196,939	)		(212,587	)
Acquisitions, net		(12,195	)		(2,992	)
Proceeds from divestitures and sales of assets		17,026			26,916
Proceeds from sale of investments		—			25,000
Railcar construction advances		—			(32,077	)
Repayments of railcar construction advances		—			32,077


Net cash used for investing activities		(192,108	)		(163,663	)


Financing activities:
Net borrowings (repayments) of long-term debt and capital lease payments		346,501			(552	)
Net borrowings on commercial paper and line of credit		75,463			12,190
Debt issuance costs		(807	)		—
Change in bank overdraft		(8,270	)		2,430
Dividends paid		(38,972	)		(33,843	)
Repurchases of common stock		(495,160	)		(112,594	)
Issuances of common stock		14,562			21,051
Excess tax benefits from stock-based compensation transactions		20,153			11,343


Net cash used for financing activities		(86,530	)		(99,975	)


Net decrease in cash and cash equivalents		(5,865	)		(53,916	)
Cash and cash equivalents, beginning of period		32,282			76,745


Cash and cash equivalents, end of period	$	26,417		$	22,829


Noncash investing and financing activities:
Issuance of notes payable for acquisition of land	$	2,897		$	—
Revisions in estimated cash flows of asset retirement obligations	$	15,000		$	1,154

Supplemental disclosures of cash flow information:
Cash paid for interest	$	33,677		$	28,015
Cash payments for income taxes	$	32,086		$	50,238

See accompanying condensed notes to consolidated financial statements.

Page 5 of 40

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY
(Unaudited)


	Shares of															Total
	Common			Common			Additional			Accumulated Other			Retained			Shareholders'
(in thousands)	Stock			Stock			Paid-in Capital			Comprehensive Loss			Earnings			Equity

Balance at December 31, 2006		44,851		$	448		$	147,491		$	(36,051	)	$	1,142,084		$	1,253,972
Increase in reserves for uncertain tax positions for FIN 48 adoption		—			—			—			—			(1,407	)		(1,407	)

Net earnings		—			—			—			—			206,208			206,208
Amortization of unrecognized actuarial losses, prior service costs and transition assets related to pension and postretirement benefits, net of tax		—			—			—			1,705			—			1,705
Foreign currency translation gain, net of tax		—			—			—			3,704			—			3,704
Change in fair value of forward starting interest rate swap agreements, net of tax		—			—			—			571			—			571

Comprehensive earnings																	212,188

Dividends declared		—			—			—			—			(38,972	)		(38,972	)
Issuances of common stock for stock award plans		592			6			40,293			—			—			40,299
Repurchases of common stock ⁽¹⁾		(3,585	)		(36	)		(150,833	)		—			(344,291	)		(495,160	)
Stock-based compensation expense		—			—			16,363			—			—			16,363

Balance at September 30, 2007		41,858		$	418		$	53,314		$	(30,071	)	$	963,622		$	987,283


⁽¹⁾		Repurchases of common stock in excess of the value of additional paid-in capital were recorded against retained earnings. Additional paid-in-capital at September 30, 2007 represents the pool of excess tax benefits and a portion of the expense related to stock options, restricted stock awards and incentive stock awards.

See accompanying condensed notes to consolidated financial statements.

Page 6 of 40

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 2007

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.		Significant Accounting Policies

		Basis of Presentation

		The accompanying unaudited consolidated financial statements of Martin Marietta Materials, Inc. (the “Corporation”) have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to the Quarterly Report on Form 10-Q and to Article 10 of Regulation S-X. The Corporation has continued to follow the accounting policies set forth in the audited consolidated financial statements and related notes thereto included in the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2006, filed with the Securities and Exchange Commission on February 28, 2007. In the opinion of management, the interim financial information provided herein reflects all adjustments, consisting of normal recurring accruals, necessary for a fair presentation of the results of operations, financial position and cash flows for the interim periods. The results of operations for the quarter and for the nine months ended September 30, 2007 are not indicative of the results expected for other interim periods or the full year.

		Retirement Plans and Postretirement Benefits

		On December 31, 2006, the Corporation adopted the recognition and disclosure provisions of Statement of Financial Accounting Standards No. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans, an Amendment of FAS 87, 88, 106 and 132(R) (“FAS 158”) prospectively. In connection with the adoption, the Corporation increased accumulated other comprehensive loss by $20,418,000, net of tax, at December 31, 2006 for the net unrecognized actuarial losses, unrecognized prior service costs and unrecognized transition assets remaining from the initial adoption of FAS 87 and FAS 106. During the nine months ended September 30, 2007, $1,705,000, net of tax, of these unrecognized amounts was recognized as a component of net periodic benefit cost pursuant to the Corporation’s historical accounting policy for amortizing such amounts.

		Uncertain Tax Positions

		Effective January 1, 2007, the Corporation adopted Financial Accounting Standards Board Interpretation No. 48, Accounting for Uncertainty in Income Taxes, an Interpretation of FAS 109(“FIN 48”). FIN 48 requires the recognition of a tax benefit when it is “more-likely-than-not,” based on the technical merits, that the position would be sustained upon examination by a taxing authority. The amount to be recognized should be measured as the largest amount of tax benefit that is greater than 50 percent likely of being realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant information.

Page 7 of 40

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 2007

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

1.		Significant Accounting Policies (continued)

		Uncertain Tax Positions (continued)

		In connection with the adoption of FIN 48, the Corporation increased its reserves for uncertain tax positions and reduced retained earnings at January 1, 2007 by $1,407,000, primarily as a result of providing interest accruals on uncertain temporary tax positions related to temporary or timing differences.

		The adoption of FIN 48 affected the Corporation’s results of operations as follows:


	Three Months Ended		Nine Months Ended
	September 30, 2007		September 30, 2007
Decreased earnings from continuing operations and net earnings by:	$	554,000	$	1,985,000
Decreased basic and diluted earnings per share by:	$	0.01	$	0.05

The following table summarizes the Corporation’s FIN 48 unrecognized tax benefits:


	Adoption of FIN 48
	January 1, 2007		September 30, 2007
Total amount of gross unrecognized tax benefits, excluding interest	$	29,248,000	$	29,354,000
Unrecognized tax benefits, net of federal tax benefits, related to interest accruals and permanent income tax differences that would favorably affect the effective tax rate if recognized	$	10,577,000	$	7,026,000

		During the quarter ended September 30, 2007, the Corporation reduced its unrecognized tax benefits by $8,655,000 when the federal statute of limitations for examination of the 2003 tax year expired. Additionally, the Corporation increased its unrecognized tax benefits by $8,761,000 for current year tax positions during the nine months ended September 30, 2007.

		The Corporation anticipates that it is reasonably possible that the total amounts of unrecognized tax benefits may significantly change within the succeeding twelve months as a result of settlement of the Internal Revenue Service audits for the 2004 and 2005 tax years. The Corporation estimates that these events could result in a reasonably possible change in unrecognized tax benefits ranging from $0 to $10,029,000.

		The Corporation records interest accrued in relation to unrecognized tax benefits as income tax expense and penalties, if incurred, are recorded as other nonoperating expenses in the consolidated statement of earnings. Accrued interest of $4,030,000 and $4,698,000 was recorded as a current FIN 48 liability in the Corporation’s consolidated balance sheet at September 30, 2007 and January 1, 2007, respectively.

Page 8 of 40

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 2007

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

1.		Significant Accounting Policies (continued)

		Uncertain Tax Positions (continued)

		The Corporation’s open tax years subject to examination are 2004 through 2006. The Internal Revenue Service is currently auditing the Corporation’s consolidated federal income tax returns for the years ended December 31, 2005 and 2004.

		Comprehensive Earnings

		Comprehensive earnings for the three and nine months ended September 30, 2007 were $89,769,000 and $212,188,000, respectively, and consisted of net earnings, foreign currency translation adjustments, changes in the fair value of forward starting interest rate swap agreements and the amortization of unrecognized amounts related to pension and postretirement benefits. For the three and nine month periods ended September 30, 2006, comprehensive earnings were $74,298,000 and $181,094,000, respectively, and consisted of net earnings and changes in the fair value of forward starting interest rate swap agreements.

2.		Divestitures and Discontinued Operations

		In 2007, the Corporation disposed of or permanently shut down certain underperforming operations in the following markets:


Reportable Segment		Markets
Mideast Group		West Virginia
West Group		Iowa, Kansas and New Mexico

These divestitures represent discontinued operations, and, therefore, the results of their operations through the dates of disposal and any gain or loss on disposals are included in discontinued operations on the consolidated statements of earnings.

Page 9 of 40

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 2007

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

2.		Divestitures and Discontinued Operations (continued)

		The discontinued operations included the following net sales, pretax loss on operations, pretax gain on disposals, income tax expense or benefit and overall net earnings or loss:


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2007			2006			2007			2006
	(Dollars in Thousands)

Net sales	$	85		$	2,357		$	1,027		$	6,008


Pretax loss on operations	$	(138	)	$	(1,247	)	$	(674	)	$	(3,169	)
Pretax gain on disposals		935			747			2,526			2,968

Pretax gain (loss)		797			(500	)		1,852			(201	)
Income tax expense (benefit)		402			(156	)		867			16

Net earnings (loss)	$	395		$	(344	)	$	985		$	(217	)

3.

Inventories


	September 30,			December 31,			September 30,
	2007			2006			2006
	(Dollars in Thousands)

Finished products	$	239,879		$	213,302		$	198,541
Products in process and raw materials		18,559			19,271			17,975
Supplies and expendable parts		42,350			37,935			40,202

		300,788			270,508			256,718
Less allowances		(15,536	)		(14,221	)		(12,181	)

Total	$	285,252		$	256,287		$	244,537

Page 10 of 40

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 2007

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

4.		Goodwill

		The following table shows changes in goodwill, all of which relate to the Aggregates business, by reportable segment and in total (dollars in thousands):


	Three Months Ended September 30, 2007
	Mideast		Southeast		West
	Group		Group		Group		Total

Balance at beginning of period	$	106,757	$	60,494	$	407,416	$	574,667
Acquisitions		—		—		—		—
Divestitures		—		—		—		—

Balance at end of period	$	106,757	$	60,494	$	407,416	$	574,667


	Nine Months Ended September 30, 2007
	Mideast		Southeast		West
	Group		Group		Group			Total

Balance at beginning of period	$	106,757	$	60,494	$	403,287		$	570,538
Acquisitions		—		—		5,132			5,132
Divestitures		—		—		(1,003	)		(1,003	)

Balance at end of period	$	106,757	$	60,494	$	407,416		$	574,667

5.

Long-Term Debt


	September 30,			December 31,			September 30,
	2007			2006			2006
	(Dollars in Thousands)

6.875% Notes, due 2011	$	249,852		$	249,829		$	249,821
5.875% Notes, due 2008		202,614			204,224			204,746
6.9% Notes, due 2007		—			124,995			124,994
7% Debentures, due 2025		124,326			124,312			124,308
6.25% Senior Notes, due 2037		247,788			—			—
Floating Rate Senior Notes, due 2010, interest rate of 5.51%		224,322			—			—
Commercial paper and line of credit, interest rates ranging from 4.40% to 5.83%		76,000			537			12,190
Acquisition notes, interest rates ranging from 2.11% to 8.00%		668			702			731
Other notes		3,204			665			640

		1,128,774			705,264			717,430
Less current maturities		(78,069	)		(125,956	)		(137,606	)

Total	$	1,050,705		$	579,308		$	579,824

Page 11 of 40

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 2007

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

5.		Long-Term Debt (continued)

		On April 25, 2007, the Corporation issued $250,000,000 of 6.25% Senior Notes due in 2037 and $225,000,000 of Floating Rate Senior Notes due in 2010 (collectively, the “Senior Notes”). The 6.25% Senior Notes may be redeemed in whole or in part prior to their maturity at a “make whole” redemption price. The Floating Rate Senior Notes bear interest at a rate equal to the three-month LIBOR (5.36% at September 30, 2007) plus 0.15% and may not be redeemed prior to maturity. Upon a change of control repurchase event, the Corporation will be required to make an offer to repurchase all outstanding Senior Notes at a price in cash equal to 101% of the principal amount of the Senior Notes, plus any accrued and unpaid interest to, but not including, the purchase date.

		The Corporation refinanced its $125,000,000 6.9% Notes that matured in August 2007 with proceeds from its offering of public debt in April 2007 and issuances of commercial paper.

		The carrying values of the Notes due in 2008 included $2,766,000, $4,469,000 and $5,022,000 at September 30, 2007, December 31, 2006 and September 30, 2006, respectively, for the unamortized value of terminated interest rate swaps.

		The Corporation entered into two forward starting interest rate swap agreements in September 2006 related to $150,000,000 of the Corporation’s anticipated refinancing of its $200,000,000 5.875% Notes due in 2008 (the “Swap Agreements”). At September 30, 2007, the fair value of the Swap Agreements was a liability of $1,006,000 and was included in other noncurrent liabilities in the Corporation’s consolidated balance sheet. Other comprehensive earnings/loss for the three and nine months ended September 30, 2007 included a loss of $2,774,000 and a gain of $571,000, respectively, net of tax, for the change in fair value of the Swap Agreements. At December 31, 2006 and September 30, 2006, the fair value of the Swap Agreements was a liability of $1,951,000 and $1,862,000, respectively.

		Borrowings of $76,000,000 and $11,000,000 were outstanding under the commercial paper program at September 30, 2007 and 2006, respectively. No commercial paper borrowings were outstanding at December 31, 2006.

		At December 31, 2006 and September 30, 2006, borrowings of $537,000 and $1,190,000, respectively, were outstanding under a $10,000,000 line of credit. No such borrowings were outstanding at September 30, 2007.

Page 12 of 40

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 2007

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

5.		Long-Term Debt (continued)

		On April 17, 2007, the Corporation entered into an amendment of its $250,000,000 five-year revolving credit agreement, which modified the leverage ratio covenant in the agreement. As modified, the covenant requires the Corporation’s ratio of consolidated debt to consolidated earnings before interest, taxes, depreciation, depletion and amortization (EBITDA), as defined, for the trailing twelve months (the “Ratio”) to not exceed 2.75 to 1.00 as of the end of any fiscal quarter. Furthermore, the covenant allows the Ratio to exclude debt incurred in connection with an acquisition for a period of 180 days, provided that the Ratio does not exceed 3.25 to 1.00. The Corporation was in compliance with the Ratio at September 30, 2007.

6.		Income Taxes


	Nine Months Ended September 30,
	2007			2006
Estimated effective income tax rate:
Continuing operations		29.6	%		29.8	%

Discontinued operations		46.8	%		(8.0	%)

Overall		29.7	%		29.8	%

		The Corporation’s effective income tax rate reflects the effect of state income taxes and the impact of differences in book and tax accounting arising from the net permanent benefits associated with the depletion allowances for mineral reserves, the domestic production deduction and the tax effect of nondeductibility of goodwill related to asset sales. The effective income tax rates for discontinued operations reflect the tax effects of individual operations’ transactions and are not indicative of the Corporation’s overall effective income tax rate.

		The change in the year-to-date estimated overall effective income tax rate during the third quarter of 2007, when compared with the year-to-date estimated overall effective income tax rate as of June 30, 2007, is primarily due to discrete tax events. During the quarter ended September 30, 2007, discrete tax events, primarily the reversal of 2003 tax reserves for which the statute of limitations expired and the true-up of the 2006 provision estimates to actual as a result of filing the related tax returns during the period, reduced income tax expense and increased net earnings by $5,120,000, or $0.12 per diluted share.

		The change in the year-to-date estimated overall effective income tax rate during the third quarter of 2006, when compared with the year-to-date estimated overall effective income tax rate as of June 30, 2006, resulted primarily from discrete tax events. During the quarter ended September 30, 2006, discrete tax events, primarily consisting of the reversal of tax contingencies related to the expiration of the statute of limitations for the 2002 tax year, providing reserves for tax contingencies and the evaluation of deferred taxes, increased net earnings for the quarter ended September 30, 2006 by $2,679,000, or $0.06 per diluted share.

Page 13 of 40

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 2007

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

7.		Pension and Postretirement Benefits

		The following presents the estimated components of the recorded net periodic benefit cost for pension and postretirement benefits for the three months ended September 30 (dollars in thousands):


	Pension						Postretirement Benefits
	2007			2006			2007			2006
Service cost	$	3,085		$	3,050		$	160		$	138
Interest cost		4,926			4,523			701			670
Expected return on assets		(5,608	)		(4,901	)		—			—
Amortization of:
Prior service cost (credit)		169			185			(324	)		(324	)
Actuarial loss (gain)		1,116			714			(24	)		(60	)

Total net periodic benefit cost	$	3,688		$	3,571		$	513		$	424

The following presents the estimated components of the recorded net periodic benefit cost for pension and postretirement benefits for the nine months ended September 30 (dollars in thousands):


	Pension						Postretirement Benefits
	2007			2006			2007			2006
Service cost	$	9,266		$	9,154		$	479		$	414
Interest cost		14,796			13,577			2,103			2,009
Expected return on assets		(16,845	)		(14,711	)		—			—
Amortization of:
Prior service cost (credit)		509			556			(971	)		(971	)
Actuarial loss (gain)		3,353			2,144			(72	)		(179	)

Total net periodic benefit cost	$	11,079		$	10,720		$	1,539		$	1,273

		The Corporation made a $12,000,000 voluntary contribution to its pension plan in the third quarter of 2007. The contribution was deductible for tax purposes for the 2006 tax year. No additional contributions are expected during the remainder of the year.

8.		Contingencies

		In the opinion of management and counsel, it is unlikely that the outcome of litigation and other proceedings, including those pertaining to environmental matters, relating to the Corporation and its subsidiaries, will have a material adverse effect on the results of the Corporation’s operations or its financial position.

Page 14 of 40

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 2007

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

9.		Business Segments

		In the fourth quarter of 2006, the Corporation reorganized the operations and management of its Aggregates business, which resulted in a change to its reportable segments. Currently, the Corporation conducts its aggregates operations through three reportable business segments: Mideast Group, Southeast Group and West Group. The Corporation also has a Specialty Products segment that includes magnesia chemicals, dolomitic lime and targeted activity in structural composites.

		The following tables display selected financial data for the Corporation’s reportable business segments. Corporate loss from operations primarily includes depreciation on capitalized interest, expenses for corporate administrative functions, unallocated corporate expenses and other nonrecurring and/or non-operational adjustments. Prior year information has been reclassified to conform to the presentation of the Corporation’s current reportable segments.


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2007			2006			2007			2006
				(Dollars in Thousands)
Total revenues:
Mideast Group	$	207,688		$	199,590		$	559,326		$	536,742
Southeast Group		140,924			144,096			407,541			420,656
West Group		226,917			217,937			579,317			587,497

Total Aggregates Business		575,529			561,623			1,546,184			1,544,895
Specialty Products		44,688			40,030			130,546			125,796

Total	$	620,217		$	601,653		$	1,676,730		$	1,670,691


Net sales:
Mideast Group	$	193,300		$	183,678		$	524,665		$	496,046
Southeast Group		119,068			119,714			352,427			348,723
West Group		197,319			188,114			502,734			508,168

Total Aggregates Business		509,687			491,506			1,379,826			1,352,937
Specialty Products		39,236			35,875			117,492			113,712

Total	$	548,923		$	527,381		$	1,497,318		$	1,466,649


Earnings (Loss) from operations:
Mideast Group	$	68,594		$	67,190		$	188,901		$	165,260
Southeast Group		19,606			16,994			68,187			48,340
West Group		45,981			36,845			76,544			78,185

Total Aggregates Business		134,181			121,029			333,632			291,785
Specialty Products		8,967			5,096			24,458			19,086
Corporate		(6,200	)		(10,113	)		(26,593	)		(22,434	)

Total	$	136,948		$	116,012		$	331,497		$	288,437

Page 15 of 40

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 2007

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

9.		Business Segments (continued)

		The asphalt, ready mixed concrete, road paving and other product lines are considered internal customers of the core aggregates business. Net sales by product line are as follows:


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2007		2006		2007		2006
			(Dollars in Thousands)
Aggregates	$	479,942	$	459,584	$	1,299,308	$	1,268,241
Asphalt		14,183		14,325		35,129		36,948
Ready Mixed Concrete		10,654		9,233		30,771		27,756
Road Paving		4,267		6,450		10,700		14,587
Other		641		1,914		3,918		5,405

Total Aggregates Business		509,687		491,506		1,379,826		1,352,937
Specialty Products		39,236		35,875		117,492		113,712

Total	$	548,923	$	527,381	$	1,497,318	$	1,466,649

10.		Supplemental Cash Flow Information

		The following table presents the components of the change in other assets and liabilities, net:


	Nine Months Ended
	September 30,
	2007			2006
	(Dollars in Thousands)
Other current and noncurrent assets	$	(7,238	)	$	(12,338	)
Notes receivable		323			5,738
Accrued salaries, benefits and payroll taxes		(2,157	)		617
Accrued insurance and other taxes		6,281			6,854
Accrued income taxes		54,401			31,067
Accrued pension, postretirement and postemployment benefits		(7,941	)		(3,039	)
Other current and noncurrent liabilities		19,058			4,627

	$	62,727		$	33,526

Page 16 of 40

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 2007

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Third Quarter and Nine Months Ended September 30, 2007

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 302 quarries, distribution facilities and plants to customers in 31 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; dolomitic lime sold primarily to customers in the steel industry; and structural composite products.

CRITICAL ACCOUNTING POLICIES The Corporation outlined its critical accounting policies in its Annual Report on Form 10-K for the year ended December 31, 2006, filed with the Securities and Exchange Commission on February 28, 2007.

During the quarter ended September 30, 2007, the Corporation reviewed its inventory standards and recorded a $3.6 million increase in its finished goods inventory values for a year-to-date total of $12.6 million, inclusive of the $9.0 million increase recorded in the second quarter of 2007. The increase in the third quarter of 2007 continues the trend of the Corporation matching current inventory values with current cost of sales. Management will continue to update its inventory standards on a quarterly basis going forward. In prior years, the Corporation updated inventory standards once a year in the fourth quarter. During the fourth quarter of 2006, the Corporation recorded a $13.4 million increase to finished goods inventory values for the annual updating of inventory standards.

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.

Page 17 of 40

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 2007

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Third Quarter and Nine Months Ended September 30, 2007
(Continued)

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, 2007 and 2006 in accordance with GAAP and reconciliations of the ratios as percentages of total revenues to percentages of net sales (dollars in thousands):

Gross Margin in Accordance with GAAP


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2007			2006			2007			2006
Gross profit	$	167,366		$	149,287		$	439,557		$	388,121

Total revenues	$	620,217		$	601,653		$	1,676,730		$	1,670,691

Gross margin		27.0	%		24.8	%		26.2	%		23.2	%

Gross Margin Excluding Freight and Delivery Revenues


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2007			2006			2007			2006

Gross profit	$	167,366		$	149,287		$	439,557		$	388,121


Total revenues	$	620,217		$	601,653		$	1,676,730		$	1,670,691
Less: Freight and delivery revenues		(71,294	)		(74,272	)		(179,412	)		(204,042	)

Net sales	$	548,923		$	527,381		$	1,497,318		$	1,466,649


Gross margin excluding freight and delivery revenues		30.5	%		28.3	%		29.4	%		26.5	%

Page 18 of 40

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 2007

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Third Quarter and Nine Months Ended September 30, 2007
(Continued)

Operating Margin in Accordance with GAAP


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2007			2006			2007			2006

Earnings from operations	$	136,948		$	116,012		$	331,497		$	288,437


Total revenues	$	620,217		$	601,653		$	1,676,730		$	1,670,691


Operating margin		22.1	%		19.3	%		19.8	%		17.3	%

Operating Margin Excluding Freight and Delivery Revenues


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2007			2006			2007			2006

Earnings from operations	$	136,948		$	116,012		$	331,497		$	288,437


Total revenues	$	620,217		$	601,653		$	1,676,730		$	1,670,691
Less: Freight and delivery revenues		(71,294	)		(74,272	)		(179,412	)		(204,042	)

Net sales	$	548,923		$	527,381		$	1,497,318		$	1,466,649


Operating margin excluding freight and delivery revenues		24.9	%		22.0	%		22.1	%		19.7	%

Quarter Ended September 30

Notable items for the quarter ended September 30, 2007 included:

•		Earnings per diluted share of $2.12, up 28% from the prior-year quarter

•		Net sales of $548.9 million, up 4% compared with the prior-year quarter

•		Consolidated operating margin excluding freight and delivery revenues of 24.9%, up 290 basis points over the prior-year quarter

•		Heritage aggregates product line pricing up 8.6%, offsetting a 4.1% volume decline

•		Specialty Products earnings from operations up 76% from the prior-year quarter

Page 19 of 40

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 2007

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Third Quarter and Nine Months Ended September 30, 2007
(Continued)

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, 2007 and 2006. 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 $0.2 million for the quarters ended September 30, 2007 and 2006. Consolidated other operating income and expenses, net, was income of $6.2 million and $2.2 million for the quarters ended September 30, 2007 and 2006, respectively.


	Three Months Ended September 30,
	2007					2006
				% of					% of
	Amount			Net Sales		Amount			Net Sales
	(Dollars in Thousands)
Net sales:
Mideast Group	$	193,300				$	183,678
Southeast Group		119,068					119,714
West Group		197,319					188,114

Total Aggregates Business		509,687			100.0		491,506			100.0
Specialty Products		39,236			100.0		35,875			100.0

Total	$	548,923			100.0	$	527,381			100.0


Gross profit:
Mideast Group	$	79,099				$	76,351
Southeast Group		25,040					22,811
West Group		51,580					46,672

Total Aggregates Business		155,719			30.6		145,834			29.7
Specialty Products		11,690			29.8		7,860			21.9
Corporate		(43	)		—		(4,407	)		—

Total	$	167,366			30.5	$	149,287			28.3


Selling, general & administrative expenses:
Mideast Group	$	10,887				$	10,371
Southeast Group		6,348					5,859
West Group		11,520					10,729

Total Aggregates Business		28,755			5.6		26,959			5.5
Specialty Products		2,591			6.6		2,683			7.5
Corporate		5,093			—		5,612			—

Total	$	36,439			6.6	$	35,254			6.7

Page 20 of 40

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 2007

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Third Quarter and Nine Months Ended September 30, 2007
(Continued)


	Three Months Ended September 30,
	2007					2006
				% of					% of
	Amount			Net Sales		Amount			Net Sales
	(Dollars in Thousands)
Earnings (Loss) from operations:
Mideast Group	$	68,594				$	67,190
Southeast Group		19,606					16,994
West Group		45,981					36,845

Total Aggregates Business		134,181			26.3		121,029			24.6
Specialty Products		8,967			22.9		5,096			14.2
Corporate		(6,200	)		—		(10,113	)		—

Total	$	136,948			24.9	$	116,012			22.0

Net sales for the Aggregates business for the 2007 third quarter were $509.7 million, a 3.7% increase over 2006 third-quarter sales of $491.5 million. Heritage aggregates pricing increased 8.6%, contributing to a 200-basis-point increase in the aggregates product line gross margin excluding freight and delivery revenues and a 290-basis-point improvement in consolidated operating margin excluding freight and delivery revenues. These record results were achieved despite a greater than 4% decline in aggregates volume and an increase in production costs resulting from operating leverage and inventory control. Pricing improvements continued to hold in the Aggregates business. As expected, the rate of growth in aggregates pricing slowed during the quarter in response to the effect of more limited 2007 mid-year price increases, which reflects reduced demand over the past six quarters. However, even with weaker demand, the rate of pricing improvement continues to be well above historic norms for the Aggregates business, which reflects the intrinsic value of well-located, zoned and permitted aggregates reserves.

While weather continued to affect performance in the West Group during the quarter, the Group finished the quarter with volumes up over 2% and showed significant earnings improvement over the prior-year period. July 2007 was the wettest July in recorded weather history in Texas and the historic rainfall affected both shipments and operations. However, as dry, hot days began to outnumber wet days in mid-August and September, volume for commercial and infrastructure projects began to return to normal levels. The Raleigh-Durham and Greensboro, North Carolina areas, as well as Virginia, had positive volume growth for the quarter. Volumes declined in most other regions of the country, reflecting the continued diminishment of residential construction coupled with a slowing in the rate of growth of commercial construction, notably office and retail space.

Page 21 of 40

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 2007

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Third Quarter and Nine Months Ended September 30, 2007
(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, 2007
	Volume			Pricing
Volume/Pricing Variance⁽¹⁾
Heritage Aggregates Product Line ⁽²⁾:
Mideast Group		(6.7	%)		12.9	%
Southeast Group		(10.5	%)		11.7	%
West Group		2.3	%		3.5	%
Heritage Aggregates Operations		(4.1	%)		8.6	%
Aggregates Product Line ⁽³⁾		(4.3	%)		8.5	%


	Three Months Ended
	September 30,
	2007		2006
	(tons in thousands)
Shipments
Heritage Aggregates Product Line⁽²⁾:
Mideast Group		19,254		20,633
Southeast Group		11,331		12,656
West Group		21,141		20,671

Heritage Aggregates Operations		51,726		53,960
Acquisitions		135		—
Divestitures⁽⁴⁾		17		245

Aggregates Product Line ⁽³⁾		51,878		54,205


(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. Furthermore, excessive rainfall can also jeopardize shipments, production and profitability. Because of the potentially significant impact of weather on the Corporation’s operations, third quarter and year-to-date results are not indicative of expected performance for other interim periods or the full year.

Page 22 of 40

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 2007

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Third Quarter and Nine Months Ended September 30, 2007
(Continued)

Third-quarter results for the Specialty Products segment, which includes magnesia chemicals, dolomitic lime and targeted activity in structural composites, were positive. Specialty Products’ net sales were $39.2 million for the third quarter 2007 compared with $35.9 million for the prior-year period. Earnings from operations for the quarter were $9.0 million compared with $5.1 million in the year-earlier period. Management has established specific quarterly benchmarks for the remainder of 2007 to evaluate the viability of the remaining components of the structural composites product line.

Selling, general and administrative expenses for the quarter ended September 30, 2007 was $36.4 million versus $35.3 million in the 2006 period. Selling, general and administrative expenses, as a percentage of net sales, declined slightly to 6.6%.

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 third quarter, consolidated other operating income and expenses, net, was income of $6.2 million in 2007 compared with $2.2 million in 2006, primarily as a result of a $4.5 million gain on the sale of land in 2007 for the West Group.

During the quarter ended September 30, 2007, the Corporation reviewed its inventory standards and recorded a $3.6 million increase in its finished goods inventory values for a year-to-date total of $12.6 million, inclusive of the $9.0 million increase recorded in the second quarter of 2007. The increase in the third quarter of 2007 continues the trend of the Corporation matching current inventory values with current cost of sales. Management will continue to update its inventory standards on a quarterly basis going forward. In prior years, the Corporation updated inventory standards once a year in the fourth quarter. During the fourth quarter of 2006, the Corporation recorded a $13.4 million increase to finished goods inventory values for the annual updating of inventory standards.

Consolidated interest expense was $17.2 million for the third quarter 2007 as compared with $10.1 million for the prior-year quarter. The increase primarily resulted from interest for the 6.25% Senior Notes and Floating Rate Senior Notes issued in April 2007 and higher outstanding commercial paper borrowings during the third quarter 2007.

In addition to other offsetting amounts, other nonoperating income and expenses, net, are comprised generally of interest income, net equity earnings from nonconsolidated investments and eliminations of minority interests for consolidated non-wholly owned subsidiaries. Consolidated other nonoperating income and expenses, net, for the quarter ended September 30, was income of $1.3 million in 2007 compared with expense of $0.2 million in 2006, primarily as a result of higher earnings on nonconsolidated investments in 2007.

Page 23 of 40

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 2007

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Third Quarter and Nine Months Ended September 30, 2007
(Continued)

Nine Months Ended September 30

Notable items for the nine months ended September 30, 2007 included:

•		Earnings per diluted share of $4.73, up 20% from the prior-year period

•		Net sales of $1.497 billion, up 2% when compared with the prior-year period

•		Consolidated operating margin excluding freight and delivery revenues of 22.1%, up 240 basis points over prior-year period

•		Heritage aggregates product line pricing up 12.1%; heritage volume decreased 8.8%

•		Repurchased 3,585,000 shares of common stock, nearly 8% of shares outstanding at the beginning of the year, at an average price of $138.12 per share

Page 24 of 40

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 2007

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Third Quarter and Nine Months Ended September 30, 2007
(Continued)

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 nine months ended September 30, 2007 and 2006. 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 $0.6 million and $0.5 million for the nine months ended September 30, 2007 and 2006, respectively. Consolidated other operating income and expenses, net, was income of $11.5 million and $9.4 million for the nine months ended September 30, 2007 and 2006, respectively.


	Nine Months Ended September 30,
	2007					2006
				% of					% of
	Amount			Net Sales		Amount			Net Sales
	(Dollars in Thousands)
Net sales:
Mideast Group	$	524,665				$	496,046
Southeast Group		352,427					348,723
West Group		502,734					508,168

Total Aggregates Business		1,379,826			100.0		1,352,937			100.0
Specialty Products		117,492			100.0		113,712			100.0

Total	$	1,497,318			100.0	$	1,466,649			100.0


Gross profit:
Mideast Group	$	220,891				$	191,167
Southeast Group		85,400					64,894
West Group		102,116					108,956

Total Aggregates Business		408,407			29.6		365,017			27.0
Specialty Products		32,823			27.9		27,287			24.0
Corporate		(1,673	)		—		(4,183	)		—

Total	$	439,557			29.4	$	388,121			26.5


Selling, general & administrative expenses:
Mideast Group	$	34,213				$	32,362
Southeast Group		19,160					17,667
West Group		34,466					33,596

Total Aggregates Business		87,839			6.4		83,625			6.2
Specialty Products		7,932			6.8		8,128			7.1
Corporate		23,250			—		16,810			—

Total	$	119,021			7.9	$	108,563			7.4

Page 25 of 40

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 2007

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Third Quarter and Nine Months Ended September 30, 2007
(Continued)


	Nine Months Ended September 30,
	2007					2006
				% of					% of
	Amount			Net Sales		Amount			Net Sales
	(Dollars in Thousands)
Earnings (Loss) from operations:
Mideast Group	$	188,901				$	165,260
Southeast Group		68,187					48,340
West Group		76,544					78,185

Total Aggregates Business		333,632			24.2		291,785			21.6
Specialty Products		24,458			20.8		19,086			16.8
Corporate		(26,593	)		—		(22,434	)		—

Total	$	331,497			22.1	$	288,437			19.7

Net sales for the Aggregates business for the nine months ended September 30 were $1.380 billion in 2007, a 2.0% increase over 2006 net sales of $1.353 billion. Aggregates pricing at heritage locations was up 12.1%, while volume decreased 8.8%. Including acquisitions and divestitures, aggregates pricing for the nine months ended September 30, 2007 increased 12.0% and aggregates product line volume decreased 9.0%. Shipment volumes reflect a significant decline in the residential construction market and inclement weather experienced by the West Group.

Page 26 of 40

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 2007

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Third Quarter and Nine Months Ended September 30, 2007
(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.


	Nine Months Ended
	September 30, 2007
Volume/Pricing Variance⁽¹⁾	Volume			Pricing
Heritage Aggregates Product Line ⁽²⁾:
Mideast Group		(8.4	%)		15.5	%
Southeast Group		(12.4	%)		15.6	%
West Group		(6.8	%)		6.1	%
Heritage Aggregates Operations		(8.8	%)		12.1	%
Aggregates Product Line ⁽³⁾		(9.0	%)		12.0	%


	Nine Months Ended
	September 30,
	2007		2006
	(tons in thousands)
Shipments
Heritage Aggregates Product Line⁽²⁾:
Mideast Group		51,279		55,982
Southeast Group		33,229		37,918
West Group		53,309		57,205

Heritage Aggregates Operations		137,817		151,105
Acquisitions		238		—
Divestitures⁽⁴⁾		144		690

Aggregates Product Line ⁽³⁾		138,199		151,795


(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.

Selling, general and administrative expenses for the nine months ended September 30, 2007 was $119.0 million versus $108.6 million in the 2006 period. This increase of $10.4 million was primarily related to a $6.7 million increase in performance-based incentive compensation. Excluding the effect of increased performance-based incentive compensation, selling, general and administrative expenses for the nine months ended September 30, 2007 increased $3.8 million, or 3.5%, in line with expected inflationary increases.

Page 27 of 40

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 2007

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Third Quarter and Nine Months Ended September 30, 2007
(Continued)

For the nine months ended September 30, other operating income and expenses, net, was income of $11.5 million in 2007 compared with $9.4 million in 2006. The increase results primarily from higher gains on sales of assets, primarily excess land, and was partially offset by lower royalty and rental income.

Consolidated interest expense was $45.1 million for the nine months ended September 30, 2007 compared with $29.8 million for the prior-year period. The increase resulted from interest for the 6.25% Senior Notes issued in April 2007, Floating Rate Senior Notes issued in April 2007, increased outstanding commercial paper balances, and a lower amount of capitalized interest related to major plant expansion and efficiency projects in 2007 as compared with the prior-year period.

LIQUIDITY AND CAPITAL RESOURCES Net cash provided by operating activities during the nine months ended September 30, 2007 was $272.8 million compared with $209.7 million in the comparable period of 2006. Operating cash flow is generally from net earnings, before deducting depreciation, depletion and amortization, offset by working capital requirements. Net cash provided by operating activities for the first nine months of 2007 as compared with the year-earlier period reflects higher earnings before depreciation, depletion and amortization and higher accruals for income tax obligations, and was partially offset by a higher build up of inventories due to declining shipment volumes, increased cash paid for interest and increased tax benefits from stock option exercise activity.

Depreciation, depletion and amortization was as follows (dollars in millions):


	Nine Months Ended
	September 30,
	2007		2006
Depreciation	$	105.5	$	95.1
Depletion		3.4		4.6
Amortization		2.2		3.0

	$	111.1	$	102.7

The increase in depreciation expense is primarily due to the completion of several large capital projects, including new plants at the Three Rivers operation in Kentucky and North Troy operation in Oklahoma.

The seasonal nature of the construction aggregates business impacts quarterly operating cash flow when compared with the year. Full year 2006 net cash provided by operating activities was $338.2 million, compared with $209.7 million for the first nine months of 2006.

Page 28 of 40

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 2007

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Third Quarter and Nine Months Ended September 30, 2007
(Continued)

First nine months capital expenditures, exclusive of acquisitions, were $196.9 million in 2007 and $212.6 million in 2006. Capital expenditures during the first nine months of 2006 included work on several major plant expansion and efficiency projects. Comparable full-year capital expenditures were $266.0 million in 2006. Full-year capital spending is expected to approximate $260.0 million for 2007, including the Hunt Martin joint venture and exclusive of acquisitions, and is up from the previous estimate of $235 million due to the purchase of 50 new barges for $24 million which were originally expected to be financed through operating leases.

During the nine months of 2006, the Corporation received repayment of a $12.5 million note receivable related to the divestiture of its Houston asphalt operations. The Corporation continues to have a continuing financial interest in the Houston asphalt market via a supply agreement and therefore continues to include the divested locations in continuing operations.

During 2007, the Corporation continued its common stock repurchase plan through open-market purchases pursuant to authority granted by its Board of Directors. The Corporation did not repurchase any shares of common stock during the quarter ended September 30, 2007. During the nine months ended September 30, the Corporation repurchased 3,585,000 shares at an aggregate cost of $495.2 million in 2007 compared with 1,274,200 shares at an aggregate cost of $112.6 million in 2006. In August 2007, the Board of Directors authorized management to repurchase up to an additional 5.0 million shares of its common stock. At September 30, 2007, 5,646,000 shares of common stock were remaining under the Corporation’s repurchase authorization.

The Corporation refinanced its $125 million 6.9% Notes that matured in August 2007 with proceeds from the Corporation’s offering of public debt in April 2007 and issuances of commercial paper in the A-2/P-2 markets (see page 31 for a discussion of credit ratings). The tightening of the credit markets made placement of A-2/P-2 commercial paper more difficult during the August and September 2007 timeframe. The Corporation initially placed the commercial paper in the overnight markets and effectively termed the commercial paper to 30-day maturities over a period of one week. Since that time, placement has not been problematic.

In September 2006, the Corporation entered into two forward starting interest rate swap agreements (the “Swap Agreements”) related to $150 million of the Corporation’s anticipated refinancing of its $200 million 5.875% Notes due in 2008. The change in fair value of the Swap Agreements, net of income taxes, is recorded directly in shareholders’ equity as other comprehensive earnings/loss. At September 30, 2007, the fair value of the Swap Agreements was a liability of $1.0 million and was included in other noncurrent liabilities in the Corporation’s consolidated balance sheet. Other comprehensive earnings/loss for the nine months ended September 30, 2007 included a gain of $0.6 million, net of tax, for the change in fair value of the Swap Agreements.

Page 29 of 40

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 2007

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Third Quarter and Nine Months Ended September 30, 2007
(Continued)

On April 17, 2007, the Corporation entered into an amendment of its $250 million five-year revolving credit agreement, which modified the leverage ratio covenant in the agreement. As modified, the covenant requires the Corporation’s ratio of consolidated debt to consolidated earnings before interest, taxes, depreciation, depletion and amortization (EBITDA), as defined, for the trailing twelve months (the “Ratio”) to not exceed 2.75 to 1.00 as of the end of any fiscal quarter. Furthermore, the covenant allows the Ratio to exclude debt incurred in connection with an acquisition for a period of 180 days, provided that the Ratio does not exceed 3.25 to 1.00. The Ratio is calculated as total long-term debt divided by consolidated EBITDA, as defined, for the trailing twelve months. Consolidated EBITDA is generally defined as earnings before interest expense, income tax expense, and depreciation, depletion and amortization expense for continuing operations. Additionally, stock-based compensation expense is added back and interest income is deducted in the calculation of consolidated EBITDA. Certain other nonrecurring items and noncash items, if they occur, can affect the calculation of consolidated EBITDA. At September 30, 2007, the Corporation’s ratio of consolidated debt to consolidated EBITDA, as defined, for the trailing twelve month EBITDA was 1.86 and was calculated as follows:


	Twelve Month Period
	October 1, 2006 to
	September 30, 2007
	(Dollars in thousands)

Earnings from continuing operations	$	267,828
Add back:
Interest expense		55,747
Income tax expense		116,355
Depreciation, depletion and amortization expense		149,157
Stock-based compensation expense		20,122
Deduct:
Interest income		(2,544	)

Consolidated EBITDA, as defined	$	606,665

Consolidated debt at September 30, 2007	$	1,128,774

Consolidated debt to consolidated EBITDA, as defined, at September 30, 2007 for the trailing twelve month EBITDA		1.86

On April 25, 2007, the Corporation issued $250 million of 6.25% Senior Notes due in 2037 and $225 million of Floating Rate Senior Notes due in 2010 (collectively, the “Senior Notes”). The 6.25% Senior Notes may be redeemed in whole or in part prior to their maturity at a “make whole” redemption price. The Floating Rate Senior Notes bear interest at a rate equal to the three-month LIBOR plus 0.15% and may not be redeemed prior to maturity. Upon a change of control repurchase event, the Corporation will be required to make an offer to repurchase all outstanding Senior Notes at a price in cash equal to 101% of the principal amount of the Senior Notes, plus any accrued and unpaid interest to, but not including, the purchase date.

Page 30 of 40

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 2007

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Third Quarter and Nine Months Ended September 30, 2007
(Continued)

The management team and Board of Directors have focused on establishing prudent leverage targets that provide for value creation through strong operational performance, continued investment in internal growth opportunities, financial flexibility to support opportunistic and strategic acquisitions and a return of cash to shareholders through sustainable dividends and share repurchase programs while maintaining a solid investment grade rating. Given these parameters, in the ordinary course of business and absent any future debt incurred in connection with an acquisition, the Corporation expects to manage its leverage within a range of 2.0 to 2.5 times consolidated debt to consolidated earnings before interest, taxes, depreciation, depletion and amortization (EBITDA), as defined by the underlying credit agreement.

Based on prior performance and current expectations, the Corporation’s management believes that cash flows from internally generated funds and its access to capital markets are expected to continue to be sufficient to provide the capital resources necessary to fund the operating needs of its existing businesses, cover debt service requirements, and allow for payment of dividends. However, the Corporation is exposed to risk from tightening credit markets, through the interest cost related to its $225 million Floating Rate Senior Notes due in 2010 and the availability and interest cost related to its commercial paper program which is rated A-2 by Standard and Poor’s and P-2 by Moody’s. Commercial paper of $76 million was outstanding at September 30, 2007. Refer also to “Risk to Earnings Expectations” disclosed in the Corporation’s third-quarter results press release dated October 30, 2007.

The Corporation may be required to obtain additional levels of financing in order to fund certain strategic acquisitions, if any such opportunities arise. Currently, the Corporation’s senior unsecured debt is rated BBB+ by Standard & Poor’s and Baa1 by Moody’s. The Corporation’s commercial paper obligations are rated A-2 by Standard & Poor’s and P-2 by Moody’s. While management believes its credit ratings will remain at an investment-grade level, no assurance can be given that these ratings will remain at those levels.

Contractual Obligations

At September 30, 2007, the Corporation had gross unrecognized tax benefits, excluding interest, of $29.4 million. The Corporation anticipates settlement of $19.4 million with the taxing authorities in the upcoming twelve months and settlement of $10.0 million in one to three years.

Page 31 of 40

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 2007

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Third Quarter and Nine Months Ended September 30, 2007
(Continued)

The Corporation’s contractual obligations related to its Senior Notes issued in April 2007 are included in the following table (dollars in thousands). Interest on the Floating Rate Senior Notes has been calculated assuming a three-month LIBOR rate equal to the September 30, 2007 rate of 5.355%.


	Total		< 1 yr		1-3 yrs.		3-5 yrs.		> 5yrs.

Long-term debt	$	475,000	$	—	$	225,000	$	—	$	250,000
Interest (off balance sheet)		502,813		35,824		68,551		46,875		351,563

Total	$	977,813	$	35,824	$	293,551	$	46,875	$	601,563

ACCOUNTING CHANGES As discussed in Note 1 to the Consolidated Financial Statements, effective January 1, 2007, the Corporation adopted FIN 48 and reduced retained earnings by $1.4 million.

TRENDS AND RISKS The Corporation outlined the risks associated with its business in its Annual Report on Form 10-K for the year ended December 31, 2006, filed with the Securities and Exchange Commission on February 28, 2007. Management continues to evaluate its exposure to all operating risks on an ongoing basis.

In July 2007, the state of North Carolina approved the issuance of $300 million of Grant Anticipation Revenue vehicles, or GARVEE bonds, to fund various road projects statewide. The bonds will be repaid with federal money the state expects to receive for highway and interstate projects in future years. Management currently expects construction to begin on these projects in 2008.

Page 32 of 40

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 2007

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Third Quarter and Nine Months Ended September 30, 2007
(Continued)

OUTLOOK 2007 Based upon the Corporation’s strong year-to-date performance, management continues to have a positive outlook for the remainder of the year. Aggregates product line pricing is expected to increase in the upper half of single digits for the fourth quarter and 10% to 11% for the year; however, aggregates shipments are becoming more difficult to estimate. Management currently expects aggregates volume to decrease 2% to 4% in the fourth quarter and decrease 6% to 8% for the year with the degree of decline predicated on continued correction in the residential construction market, in addition to slower growth in commercial construction. Management believes certain commercial construction, notably office and retail space, is exhibiting a cautionary pause in activity in some areas as developers digest the impact of the current credit markets on construction and development plans. Capacity-related, industrial and distribution-related construction remains in a solid growth pattern. Infrastructure spending is expected to remain positive, although rising construction and materials prices have made projects more costly.

The Specialty Products segment, which includes magnesia chemicals, dolomitic lime and focused activity in structural composites, is expected to contribute $31 million to $33 million in pretax earnings in 2007 compared with $22 million in 2006. Management expects the magnesia chemicals business to continue to grow and demand for dolomitic lime from the steel industry to be down slightly.

With this backdrop, management currently expects net earnings per diluted share for the fourth quarter to range from $1.37 to $1.72 and the range for the year is $6.10 to $6.45.

OTHER MATTERS If you are interested in Martin Marietta Materials, Inc. stock, management recommends that, at a minimum, you read the Corporation’s current Annual Report and Forms 10-K, 10-Q and 8-K reports to the SEC over the past year. The Corporation’s recent proxy statement for the annual meeting of shareholders also contains important information. These and other materials that have been filed with the SEC are accessible through the Corporation’s web site atwww.martinmarietta.com and are also available at the SEC’s web site at www.sec.gov. You may also write or call the Corporation’s Corporate Secretary, who will provide copies of such reports.

Investors are cautioned that all statements in this Quarterly Report that relate to the future involve risks and uncertainties, and are based on assumptions that the Corporation believes in good faith are reasonable but which may be materially different from actual results. Forward-looking statements give the investor our expectations or forecasts of future events. You can identify these statements by the fact that they do not relate only to historical or current facts. They may use words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” and other words of similar meaning in connection with future events or future operating or financial performance. Any or all of our forward-looking statements here and in other publications may turn out to be wrong.

Page 33 of 40

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 2007

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Third Quarter and Nine Months Ended September 30, 2007
(Continued)

Factors that the Corporation currently believes could cause actual results to differ materially from the forward-looking statements in this Quarterly Report on Form 10-Q include, but are not limited to, the level and timing of federal and state transportation funding, particularly in North Carolina, one of the Corporation’s largest and most profitable states, and Texas and South Carolina, which when coupled with North Carolina, represented 44% of 2006 net sales in the Aggregates business; levels of commercial construction spending in the markets the Corporation serves; the severity of a continued decline in the residential construction market and the slowing growth rate in commercial construction, notably office and retail space; unfavorable weather conditions, particularly Atlantic Ocean hurricane activity and the early onset of winter; the volatility of fuel costs; continued increases in the cost of repair and supply parts; transportation availability, notably barge availability on the Mississippi River system and the availability of railcars and locomotive power to move trains to supply the Corporation’s Texas and Gulf Coast markets; increased transportation costs, including increases from higher passed-through energy costs and higher volumes of rail and water shipments; continued strength in the steel industry markets served by the Corporation’s dolomitic lime products; successful development and implementation of the structural composite technological process, commercialization of strategic products for specific market segments, and the generation of earnings streams sufficient enough to support the recorded assets of the structural composites product line; and other risk factors listed from time to time found in the Corporation’s filings with the Securities and Exchange Commission. Other factors besides those listed here may also adversely affect the Corporation and may be material to the Corporation. The Corporation assumes no obligation to update any forward-looking statements.

INVESTOR ACCESS TO COMPANY FILINGS Shareholders may obtain, without charge, a copy of Martin Marietta Materials’ Annual Report on Form 10-K, as filed with the Securities and Exchange Commission for the fiscal year ended December 31, 2006, by writing to:

Martin Marietta Materials, Inc.
Attn: Corporate Secretary
2710 Wycliff Road
Raleigh, North Carolina 27607-3033

Additionally, Martin Marietta Materials’ Annual Report, press releases and filings with the Securities and Exchange Commission, including Forms 10-K, 10-Q, 8-K and 11-K, can generally be accessed via the Corporation’s web site. Filings with the Securities and Exchange Commission accessed via the web site are available through a link with the Electronic Data Gathering, Analysis, and Retrieval (“EDGAR”) system. Accordingly, access to such filings is available upon EDGAR placing the related document in its database. Investor relations contact information is as follows:

Telephone: (919) 783-4540
Web site address: www.martinmarietta.com

Page 34 of 40

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 2007

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

The Corporation’s operations are highly dependent upon the interest rate-sensitive construction and steelmaking industries. Consequently, these marketplaces could experience lower levels of economic activity in an environment of rising interest rates or escalating costs. Since June 30, 2004, the Federal Reserve Board has increased the federal funds rate from 1.00% to 4.75% at September 30, 2007. This increase has negatively affected the residential construction market, which accounted for approximately 17% of the Corporation’s aggregates product line shipments in 2006. Aside from these inherent risks from within its operations, the Corporation’s earnings are affected also by changes in short-term interest rates, as a result of its temporary cash investments, including money market funds and overnight investments in Eurodollars; any outstanding commercial paper obligations; Floating Rate Senior Notes; defined benefit pension plans; and energy costs. Additionally, the shareholders’ equity of the Corporation is affected by changes in the fair value of forward starting interest rate swap agreements.

Commercial Paper Obligations. The Corporation has a $250 million commercial paper program in which borrowings bear interest at a variable rate based on LIBOR. At September 30, 2007, commercial paper borrowings of $76 million were outstanding. As commercial paper borrowings bear interest at a variable rate, the Corporation has interest rate risk. The effect of a hypothetical 100 basis point increase in interest rates on commercial paper borrowings of $76 million would increase interest expense by $0.8 million on an annual basis.

Floating Rate Senior Notes. The Corporation has $225 million of Floating Rate Senior Notes that bear interest at a rate equal to the three-month LIBOR plus 0.15%. As the Floating Rate Senior Notes bear interest at a variable rate, the Corporation has interest rate risk. The effect of a hypothetical 100 basis point increase in interest rates on borrowings of $225 million would increase interest expense by $2.3 million on an annual basis.

Pension Expense. The Corporation’s results of operations are affected by its pension expense. Assumptions that affect this expense include the discount rate and the expected long-term rate of return on assets. Therefore, the Corporation has interest rate risk associated with these factors. The impact of hypothetical changes in these assumptions on the Corporation’s annual pension expense is discussed in the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2006, filed with the Securities and Exchange Commission on February 28, 2007.

Energy Costs. Energy costs, including diesel fuel and natural gas, represent significant production costs for the Corporation. Increases in these costs generally are tied to energy sector inflation. In 2006, energy costs increased significantly, with fuel price increases lowering earnings per diluted share by $0.36. A hypothetical 10% change in the Corporation’s energy prices in 2007 as compared with 2006, assuming constant volumes, would impact 2007 pretax earnings by approximately $17.8 million.

Page 35 of 40

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 2007

Aggregate Risk for Interest Rates and Energy Sector Inflation. The pension expense for 2007 is calculated based on assumptions selected at December 31, 2006. Therefore, interest rate risk in 2007 is limited to the potential effect related to outstanding commercial paper and the Corporation’s Floating Rate Senior Notes. Assuming outstanding commercial paper of $76 million and Floating Rate Senior Notes of $225 million, the impact of a hypothetical 100 basis point increase in interest rates would increase interest expense and decrease pretax earnings by $3.0 million. Additionally, a 10% change in energy costs would impact annual pretax earnings by $17.8 million.

Forward Starting Interest Rate Swap Agreements. In September 2006, the Corporation entered into forward starting interest rate swap agreements (the “Swap Agreements”) for the anticipated refinancing of $150.0 million of its $200.0 million 5.875% Notes due in 2008. In accordance with Statement of Financial Accounting Standards No. 133 Accounting for Derivative Instruments and Hedging Activities (“FAS 133”), the fair values of the Swap Agreements are recorded as an asset or liability in the consolidated balance sheet. The change in fair value is recorded directly in shareholders’ equity, net of taxes, as other comprehensive earnings/loss. At September 30, 2007, the fair value of the Swap Agreements was a liability of $1.0 million and was included in other noncurrent liabilities in the Corporation’s consolidated balance sheet.

As a result of the Swap Agreements, the Corporation’s comprehensive earnings/loss will be affected by changes in the LIBOR rate. A hypothetical change in interest rates of 100 basis points would change other comprehensive earnings/loss by approximately $5.7 million, which is net of taxes of $3.7 million.

Item 4. Controls and Procedures

As of September 30, 2007, an evaluation was performed under the supervision and with the participation of the Corporation’s management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and the operation of the Corporation’s disclosure controls and procedures. Based on that evaluation, the Corporation’s management, including the Chief Executive Officer and Chief Financial Officer, concluded that the Corporation’s disclosure controls and procedures were effective as of September 30, 2007. There have been no significant changes in the Corporation’s internal controls or in other factors that could significantly affect the internal controls subsequent to September 30, 2007.

Page 36 of 40

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 2007

PART II-OTHER INFORMATION

Item 1. Legal Proceedings.

Reference is made to Part I. Item 3. Legal Proceedings of the Martin Marietta Materials, Inc. Annual Report on Form 10-K for the year ended December 31, 2006.

Item 1A. Risk Factors.

Reference is made to Part I. Item 1A. Risk Factors and Forward-Looking Statements of the Martin Marietta Materials, Inc. Annual Report on Form 10-K for the year ended December 31, 2006.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

ISSUER PURCHASES OF EQUITY SECURITIES


					Total Number of		Maximum Number of
					Shares Purchased as		Shares that May Yet
					Part of Publicly		be Purchased Under
	Total Number of		Average Price Paid		Announced Plans or		the Plans or
Period	Shares Purchased		per Share		Programs		Programs
July 1, 2007 — July 31, 2007		—	$	—		—		645,998
August 1, 2007 — August 31, 2007		—	$	—		—		5,645,998
September 1, 2007 — September 30, 2007		—	$	—		—		5,645,998

Total		—	$	—		—		5,645,998

During the quarter ended September 30, 2007, the Corporation did not repurchase any shares of its common stock. In August 2007, the Board of Directors authorized management to repurchase up to an additional 5.0 million shares of its common stock.

The Corporation’s initial stock repurchase program, which authorized the repurchase of 2.5 million shares of common stock, was announced in a press release dated May 6, 1994, and has been updated as appropriate. The program does not have an expiration date.

Page 37 of 40

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 2007

PART II-OTHER INFORMATION
(Continued)

Item 6. Exhibits.


Exhibit
No.		Document

31.01		Certification dated October 30, 2007 of Chief Executive Officer pursuant to Securities and Exchange Act of 1934 rule 13a-14 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.02		Certification dated October 30, 2007 of Chief Financial Officer pursuant to Securities and Exchange Act of 1934 rule 13a-14 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.01		Written Statement dated October 30, 2007 of Chief Executive Officer required by 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.02		Written Statement dated October 30, 2007 of Chief Financial Officer required by 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Page 38 of 40

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	MARTIN MARIETTA MATERIALS, INC. (Registrant)
Date: October 30, 2007	By:	/s/ Anne H. Lloyd
		Anne H. Lloyd
		Senior Vice President and Chief Financial Officer

Page 39 of 40

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 2007

EXHIBIT INDEX


Exhibit No.		Document

31.01		Certification dated October 30, 2007 of Chief Executive Officer pursuant to Securities and Exchange Act of 1934 rule 13a-14 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.02		Certification dated October 30, 2007 of Chief Financial Officer pursuant to Securities and Exchange Act of 1934 rule 13a-14 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.01		Written Statement dated October 30, 2007 of Chief Executive Officer required by 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.02		Written Statement dated October 30, 2007 of Chief Financial Officer required by 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Page 40 of 40

Martin Marietta Materials - 10-Q quarterly report FY

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