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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended September 30, 2002

Commission File Number 1-12744

MARTIN MARIETTA MATERIALS, INC.

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

Former name:

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 2134 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   x    No   o

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

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Exhibit Index is on Page 34

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

FORM 10-Q

For the Quarter Ended September 30, 2002

INDEX

Page 2 of 34

PART I — FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

See accompanying notes to consolidated financial statements.

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

See accompanying notes to consolidated financial statements.

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES

See accompanying notes to consolidated financial statements.

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 2002

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.		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, 2001, filed with the Securities and Exchange Commission on March 27, 2002. 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 for the interim periods. The results of operations for the nine months ended September 30, 2002, are not indicative of the results to be expected for the full year.
2.		Inventories

3.

Long-Term Debt

Page 6 of 34

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 2002

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

In August 2002, the Corporation amended its five-year credit agreement by increasing the credit facility from $225 million to $275 million. This agreement expires in August 2006. Furthermore, the Corporation did not renew the 364-day $225 million revolving credit agreement that expired in August 2002. Additionally, the Corporation reduced its commercial paper program facility from $450 million to $275 million.

No borrowings were outstanding on the Corporation’s revolving credit agreement at September 30, 2002. However, this agreement supported commercial paper borrowings of $60 million outstanding at September 30, 2002, of which $60 million has been classified as long-term debt in the Corporation’s consolidated balance sheet based on management’s ability and intention to maintain this debt outstanding for at least one year. At November 1, 2002, $55 million was outstanding under the Corporation’s commercial borrowing obligations. See the “Liquidity and Capital Resources” discussion contained in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” on pages 20 through 22 of this Form 10-Q.

In May 2002, the Corporation entered into interest rate swap agreements (the “Swaps”) for interest related to $100 million of the $200 million Notes due in 2008. The Corporation will receive a 5.875% fixed annual interest rate and pay a floating annual rate equal to six-month London Inter Bank Offer Rate (“LIBOR”) plus an average of 0.235%. The critical terms of the Swaps and the related Notes agree, and other conditions of Statement of Financial Accounting Standards No. 133 Accounting for Derivative Instruments and Hedging Activities (“FAS 133”) have been met; accordingly, the hedge is considered perfectly effective and qualifies for the shortcut method of accounting. The Corporation is required to record the fair value of the Swaps and the corresponding change in the fair value of the related Notes in its consolidated balance sheet. For financial reporting purposes, the change in fair value represents a noncash event and therefore does not affect the consolidated statement of cash flows. At September 30, 2002, the fair market value of the debt covered by the Swaps was $109,325,000 as compared to amounts payable to bondholders of $99,650,000. The fair value of the Swaps, $9,675,000, is included in other noncurrent assets in the consolidated balance sheet.

The Corporation’s interest payments were approximately $29.8 million in 2002 and $27.7 million in 2001 for the nine months ended September 30.

In connection with acquisitions completed in 2002, the Corporation has assumed indebtedness of $7.5 million.

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MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 2002

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

4. Income Taxes

The Corporation’s estimated effective income tax rate for the nine months ended September 30, was 35.0% in 2002 and 32.4% in 2001. The Corporation’s effective 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, foreign operating earnings, earnings from nonconsolidated investments, and for the nine months ended September 30, 2001, amortization of nondeductible goodwill. For the nine months ended September 30, 2002, the estimated effective tax rate increased primarily as a result of the write-off of nondeductible goodwill allocated to the divestiture of six quarries in the Columbus, Ohio, area. In accordance with generally accepted accounting principles, the gain from the divestiture was treated as ordinary income. During the third quarter 2002, this was partially offset by the favorable effect of statutory depletion, which decreased the year-to-date estimated effective tax rate from 37.5% at June 30, 2002. This decrease resulted in a tax rate of 32.0% for the third quarter 2002. The decrease in the estimated effective tax rate for year-to-date 2002 increased net income for the nine months ended September 30, 2002, by $3.1 million, or $0.06 per diluted share.

The Corporation’s income tax net payments (refunds) were approximately $22.0 million in 2002 and ($2.5) million in 2001, for the nine months ended September 30.

5. 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.

6. Adoption of Statement of Financial Accounting Standards No. 142 Goodwill and Other Intangible Assets (“FAS 142”)

Effective January 1, 2002, the Corporation adopted FAS 142. Under the new rules, goodwill and intangible assets deemed to have indefinite lives are no longer amortized, but are tested annually for impairment. FAS 142 provides new measurement techniques for evaluating the recoverability of such assets. Other intangible assets, which consist primarily of contractual agreements, continue to be amortized over their useful lives.

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MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 2002

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

Management determined that the reporting units, which represent the level at which goodwill is tested for impairment, are the eight divisions of the Aggregates segment and the road paving business. There is no goodwill associated with the Magnesia Specialties segment. In accordance with FAS 142, goodwill for each of the reporting units is being tested for impairment by comparing the fair value of the reporting unit to its carrying value. The comparison of fair value to carrying value represents Step 1 of the two-step approach required by FAS 142. Generally, the fair values of the reporting units were determined using a 15-year discounted cash flow model. Key assumptions included management’s estimates of future profitability, capital requirements, a discount rate of 10% and a terminal growth rate of 2%. All reporting units had fair values in excess of their carrying values, except for the road paving business. Therefore, Step 2 is required for the road paving business reporting unit.

Step 2 requires the implied fair value of goodwill to be calculated by allocating the fair value of the reporting unit to its tangible and intangible net assets, other than goodwill. The remaining unallocated fair value represents the implied fair value of the goodwill. If the carrying value of goodwill exceeds its implied fair value, an impairment charge is recorded for the difference. If the implied fair value exceeds its carrying amount, there is no impairment. Step 2 for the road paving business will be completed by December 31, 2002. The Corporation currently expects the pretax impairment charge to be up to $15 million. The impairment charge resulting from the adoption of FAS 142 will be recorded as the cumulative effect of a change in accounting principle, retroactive to January 1, 2002.

During the quarters ended September 30, 2002 and 2001, the Corporation acquired goodwill of $13,091,000 and $9,962,000, respectively, all related to acquisitions in the Aggregates segment. During each of the quarters ended September 30, 2002 and 2001, the acquired goodwill related to three acquisitions. The following shows the changes in net goodwill in 2002 (dollars in thousands):

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MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 2002

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

For the three months ended September 30, 2002, the goodwill allocated to divestitures relates to the sale of locations in southern Iowa. For the nine months ended September 30, 2002, the amounts allocated to divestitures primarily include goodwill associated with quarries in the Columbus, Ohio, area and the Fredericksburg and Culpeper, Virginia, areas. Under FAS 142, the disposition of all or a portion of a reporting unit requires the inclusion of all or an allocable portion of goodwill to be included in the carrying value of the business sold in determining the gain or loss on the disposal.

During the quarters ended September 30, 2002 and 2001, the Corporation acquired other intangibles of $2,071,000 and $3,400,000, respectively. These other intangibles included noncompetition agreements valued at $1,050,000 and $1,100,000 with a weighted-average amortization period of 6.33 and 5.82 years in 2002 and 2001, respectively. In 2002, the Corporation also acquired licensing agreements valued at $1,021,000 with a weighted-average amortization period of 6.38 years. Additionally, tradenames valued at $2,100,000 with a weighted-average amortization period of 7.43 years were acquired in 2001. The weighted-average amortization period for all other intangibles subject to amortization acquired in the quarters ended September 30, 2002 and 2001, was 6.36 years and 6.88 years, respectively. In the quarter ended September 30, 2001, the Corporation acquired indefinite lived use rights valued at $200,000.

Intangible assets subject to amortization consist of the following (dollars in thousands):

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MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 2002

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

Total amortization expense for other intangibles for the quarters ended September 30, 2002 and 2001 was $1,642,000 and $1,118,000, respectively. For the nine months ended September 30, 2002 and 2001, total amortization expense for other intangibles was $4,512,000 and $4,412,000, respectively. The following presents the estimated amortization expense for intangible assets for each of the next five years and thereafter. The expense for 2002 includes the amount recognized in the nine months ended September 30, 2002 (dollars in thousands):

Intangible assets not subject to amortization are use rights that have a carrying value of $200,000 at September 30, 2002.

In accordance with FAS 142, effective January 1, 2002, the Corporation discontinued the amortization of goodwill. The following pro forma information presents the results of operations for the three months ended and nine months ended September 30, 2001, as if FAS 142 had been adopted on January 1, 2001 (dollars in thousands, except per share amounts):

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MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 2002

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

7. Accounting Changes

Effective January 1, 2002, the Corporation adopted Statement of Financial Accounting Standards No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets (“FAS 144”). FAS 144 supercedes Statement of Financial Accounting Standards No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed of and Accounting Principles Board Opinion No. 30, Reporting the Results of Operations – Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions. FAS 144 establishes criteria for the recognition and measurement of an impairment loss for long-lived assets to be held and used and defines classification of continuing and discontinued operations. FAS 144 also requires that assets held for sale be measured at the lower of their carrying amount or fair value less cost to sell. The adoption of FAS 144 did not have a material effect on the Corporation’s earnings or financial position.

In June 2001, the FASB issued Statement of Financial Accounting Standards No. 143, Accounting for Asset Retirement Obligations (“FAS 143”). FAS 143 requires recognition of the fair value of a liability representing an asset retirement obligation in the period in which it is incurred. The asset retirement obligation is recorded at the acquisition date of a long-lived tangible asset if a reasonable estimate of fair value can be made. A corresponding amount is capitalized as part of the asset’s carrying amount. The Corporation incurs some reclamation liabilities as part of its aggregates mining process. However, certain reclamation costs are currently treated as normal ongoing operating expenses and expensed generally in the period in which they are incurred. FAS 143 is effective the first quarter of 2003 for the Corporation. The effect of the adoption of FAS 143 on the earnings and financial position of the Corporation has not yet been determined. However, there can be no assurance that it will not be material to the earnings or financial position of the Corporation.

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MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 2002

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Third Quarter and Nine Months Ended September 30, 2002 and 2001

OVERVIEW   Martin Marietta Materials, Inc. (the “Corporation”), operates in two principal business segments: aggregates products and magnesia-based products. The Corporation’s sales and earnings are predominately derived from its aggregates segment, which processes and sells granite, limestone, and other aggregates products from a network of approximately 330 quarries and distribution facilities in 28 states in the southeastern, southwestern, midwestern and central regions of the United States and in the Bahamas and Canada. The division’s products are used primarily by commercial customers principally in domestic construction of highways and other infrastructure projects and for commercial and residential buildings. The magnesia-based 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, 2001, filed with the Securities and Exchange Commission on March 27, 2002. Management continues to evaluate its accounting policies to identify those policies that are considered critical. Effective January 1, 2002, the evaluation of impairment for goodwill and indefinite-lived intangible assets in accordance with the criteria prescribed in Statement of Financial Accounting Standards No. 142 Goodwill and Other Intangible Assets (“FAS 142”) became a critical accounting policy. As discussed in Note 6 to the consolidated financial statements on pages 8 through 11, the Corporation has completed Step 1 of the initial evaluation and will complete Step 2 for the road paving business reporting unit by December 31, 2002. The Corporation currently expects the pretax impairment charge to be up to $15 million.

The direct influence of long-term interest rates and investment returns, and the volatility that changes in these factors can have on retirement and postretirement benefit expense, supported the selection of retirement and postretirement benefits as a critical accounting policy in the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2001, filed with the Securities and Exchange Commission on March 27, 2002. Continued current volatility in the economy and the resulting effect on investment returns of the assets invested in the retirement benefit fund will require cash contributions in 2003 and significantly increase the pension expense. The required cash contribution in 2003 is not expected to be material to the cash position of the Corporation. The assets and liabilities related to the retirement plan, including the selection of the discount rate, will be established at December 31, 2002. Assuming the current value of the pension assets and a discount rate range of 6.75% to 7.00%, management expects an additional minimum pension liability at December 31, 2002, ranging from $10 million to $20 million. This liability will require a corresponding direct charge to shareholders’ equity. The estimates are subject to change for market events, which are outside of the control of the Corporation. See Note I and the “Capital Structure and Resources” section contained in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2001, for further information.

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MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 2002

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Third Quarter and Nine Months Ended September 30, 2002 and 2001
(Continued)

RESULTS OF OPERATIONS Consolidated net sales for the quarter were $429.1 million, a 2% decrease as compared to 2001 third quarter sales of $437.0 million. Consolidated earnings from operations were $68.7 million in the third quarter of 2002 compared with $79.8 million in the third quarter of 2001. The third quarter of 2001 included $6.1 million of goodwill amortization expense. Interest expense for the quarter was $11.2 million as compared to $12.1 million in the third quarter of 2001. Consolidated net earnings for the quarter were $38.9 million, or $0.80 per diluted share, compared to 2001 third quarter net earnings of $45.9 million, or $0.95 per diluted share.

Consolidated net sales for the first nine months of 2002 increased 2% to $1.14 billion. On a year-to-date basis, earnings from operations decreased 1% to $145.6 million in 2002, as compared to $146.5 million in 2001. The nine months ended September 30, 2001, included $16.3 million of goodwill amortization expense. Interest expense decreased 7% to $33.5 million in 2002 as compared to $35.9 million in 2001. Other income and expenses, net, was $13.7 million in income in 2002, compared to $8.3 million in income in 2001. The estimated effective tax rate for year-to-date 2002 of 35.0% reflects the increase in the rate resulting from the nondeductibility of goodwill written off in connection with divestitures in the second quarter, offset by the favorable effect of statutory depletion and the elimination of goodwill amortization. Year-to-date 2002 net earnings were $81.7 million, or $1.67 per diluted share, compared to $80.3 million, or $1.68 per diluted share, for the year-earlier period.

Net sales for the Aggregates division decreased 1% to $411.3 million for the third quarter, compared with the year-earlier period. Net sales for the division reflects a 2.7% increase in average selling price offset by a 4.3% decrease in aggregates shipments during the quarter. Heritage aggregates operations experienced a 1.6% increase in average selling price mostly offset by a 1.2% decline in shipments. For the nine months ended September 30, net sales increased 4% in 2002 as compared to the prior year period, principally as a result of acquisitions.

Gross profit as a percentage of net sales for the Aggregates division was 23.2% as compared to 24.9% in the prior year third quarter. The decline was caused by soft aggregates demand, particularly in commercial construction and road construction. Weak demand in the southeastern region, which historically contributes above-average margins as a percentage of net sales, contributed to overall lower margins. In particular, the pace of decline in these regions had a significant impact on results. Emphasis on inventory control in an effort to track declining demand with production levels resulted in under-absorption of fixed production costs. Additionally, the Aggregates division was negatively affected by unusually wet weather conditions, particularly in Texas, which contributed to lower volumes and higher costs. The Meridian acquisition performed below expectations, primarily as a result of significantly declining aggregates demand in the Dallas/Ft. Worth area, coupled with wet Texas weather. Strong performance in the asphalt and ready mix operations contributed positively to the quarter. For the nine months ended September 30, gross margin percentage was relatively constant at 20.6% in 2002 and 20.7% in 2001.

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MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 2002

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)

Third Quarter and Nine Months Ended September 30, 2002 and 2001

     The following tables present volume, pricing and shipment data for heritage operations and acquisitions:

(1)		Volume/pricing variances reflect the percentage increase/(decrease) from the comparable period in the prior year.
(2)		Heritage aggregates operations exclude acquisitions that have not been included in prior-year operations for the full fiscal year.
(3)		Aggregates operations includes all acquisitions from the date of acquisition.
(4)		Divestitures include the tons related to divested operations up to the date of divestiture.

Selling, general and administrative expenses increased 14% for the quarter at the Aggregates division. On a year-to-date basis, these expenses increased 16% to $82.9 million. The increase resulted primarily from higher health and pension costs as well as higher costs, including depreciation, related to the Corporation’s information systems project.

The Aggregates division’s earnings from operations were $67.4 million in the third quarter of 2002 as compared to $79.0 million in the third quarter of 2001. On a year-to-date basis, the division’s earnings from operations were $141.4 million in 2002 and $144.9 million in 2001.

The Aggregates division’s business is significantly affected by seasonal changes and other weather-related conditions. Consequently, the Aggregates division’s production and shipment levels coincide with general construction activity levels, most of which occur in the division’s markets typically during the spring, summer, and fall seasons. Further because of the potentially significant impact of weather on the Corporation’s operations, nine month results are not indicative of expected performance for the year.

Page 15 of 34

MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 2002

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)

Third Quarter and Nine-Months Ended September 30, 2002 and 2001

Magnesia Specialties’ third quarter 2002 net sales of $17.8 million declined 19% when compared to the prior year’s net sales of $22.2 million. Earnings from operations for the third quarter were $1.3 million and $0.8 million, for 2002 and 2001, respectively. For the nine months ended September 30, net sales were $56.3 million and $79.4 million in 2002 and 2001, respectively. As expected, net sales decreased primarily due to the sale of certain assets of the refractories business in May 2001. On a year-to-date basis, earnings from operations were $4.2 million and $1.6 million in 2002 and 2001, respectively. The increase is primarily attributable to favorable energy prices in the first half of 2002.

The following tables present net sales, gross profit, selling, general and administrative expenses, and earnings from operations data for the Corporation and each of its divisions for the three month and nine month periods ended September 30, 2002 and 2001. In each case, the data is stated as a percentage of net sales of the Corporation or the relevant division, as the case may be.

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MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 2002

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)

Third Quarter and Nine Months Ended September 30, 2002 and 2001