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SECURITIES AND EXCHANGE COMMISSION

FORM 10-Q

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

For the quarterly period ended June 30, 2003

Commission File Number 1-12744

MARTIN MARIETTA MATERIALS, INC.

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.

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act)

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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MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended June 30, 2003

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PART I - FINANCIAL INFORMATION

ITEM 1. Financial Statements

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

See accompanying notes to consolidated financial statements.

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

See accompanying notes to consolidated financial statements.

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

See accompanying notes to consolidated financial statements.

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MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended June 30, 2003

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.		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, 2002, filed with the Securities and Exchange Commission on March 27, 2003. 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 six months ended June 30, 2003 are not indicative of the results to be expected for the full year.
		In 2002 and 2003, the Corporation divested of certain nonstrategic operations within its Aggregates operating segment with the 2003 divestitures being uncertain as of December 31, 2002. As such, the Corporation had a continuing financial interest in this certain group of assets and the related market served by these operations during 2002 and through the 2003 date of disposal. In the first quarter 2003, the divestiture resulted in discontinued operations and therefore the results of all operations through the date of disposal and any gain or loss on disposals are included in “(Loss) earnings from discontinued operations” on the consolidated statements of earnings. The results of discontinued operations during the quarter and six months ended June 30, 2002 have been reclassified, as required, to conform to the 2003 presentation. For the quarter ended June 30, the discontinued operations included net sales of $0.4 million and $11.0 million in 2003 and 2002, respectively, and a pretax loss of $0.3 million in 2003 and a pretax gain of $23.2 million in 2002. The pretax loss for the quarter ended June 30, 2003 included a gain on disposal of $0.3 million. The pretax gain for the quarter ended June 30, 2002 included gains on disposals of $21.6 million.
		For the six months ended June 30, the discontinued operations included net sales of $1.1 million and $19.4 million in 2003 and 2002, respectively, and a pretax loss of $2.1 million in 2003 and a pretax gain of $18.0 million in 2002. The pretax gain for the six months ended June 30, 2002 included a gain on disposal of $21.6 million.
		During the six months ended June 30, 2003, the Corporation decreased its accrual for incurred but not reported claims related to its self-insurance health benefits provided to its employees. The change in estimate was based on the Corporation’s recent claims experience and increased net earnings for the six months by $1.3 million, or $0.03 per diluted share.

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MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended June 30, 2003

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

1.		Basis of Presentation (continued)
		The financial statements for the six months ended June 30, 2002 have been restated to reflect the adoption of Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets (“FAS 142”). An impairment charge of $11.5 million, or $0.23 per diluted share, was recorded during the fourth quarter of 2002, retroactive to January 1, 2002, as the cumulative effect of adopting FAS 142.
		Certain 2002 amounts have been reclassified to conform to the 2003 presentation. Such reclassifications had no impact on previously reported net earnings or financial position.
2.		Inventories

3.		Goodwill
		The following shows changes in net goodwill (dollars in thousands):

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MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended June 30, 2003

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

4.

Long-Term Debt

		No borrowings were outstanding under the Corporation’s revolving credit agreement at June 30, 2003. However, this agreement supports commercial paper borrowings of $30 million outstanding at June 30, 2003, which has been classified as long-term debt in the Corporation’s consolidated balance sheet based on management’s ability to maintain this debt outstanding for at least one year. At July 31, 2003, $10 million of commercial paper borrowings was outstanding. 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 and 21 of this Form 10-Q.
		In May 2003, the Corporation terminated its interest rate swap agreements (the “Swaps”) and received a cash payment of $12.6 million, which represented the fair value of the Swaps on the date of termination. The Corporation also received accrued interest of $2.1 million, which represented the difference in the interest rate between the fixed interest received and the variable interest paid from the previous interest payment date to the termination date. In accordance with generally accepted accounting principles, the carrying amount of the related Notes on the date of termination, which includes adjustments for changes in the fair value of the debt while the Swaps were in effect, will be accreted back to its par value over the remaining life of the Notes. The accretion will decrease annual interest expense by approximately $2 million until the maturity of the Notes in 2008.
		The Corporation, through its Magnesia Specialties division, is a 50% member of a limited liability company. Each of the two members of the limited liability company has guaranteed 50% of its debt, each up to a maximum of $7.5 million.

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MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended June 30, 2003

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

5.		Income Taxes
		The Corporation’s effective income tax rate for continuing operations for the six months ended June 30 was 32.4% in 2003 and 30.1% in 2002. The Corporation’s effective tax rate includes 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 and earnings from nonconsolidated investments.
		The effective income tax rate for discontinued operations for the six months ended June 30, 2003 and 2002 was 39.8% and 58.1%, respectively. The 2002 rate includes the permanent differences associated with the write off of nondeductible goodwill related to certain divestitures.
6.		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.
		The collective bargaining agreement at the Corporation’s Manistee, Michigan facility, which was scheduled to expire in August 2003, has been extended while negotiations for a long-term contract continue. Although management currently believes that a work stoppage is unlikely, there is no assurance that a successor agreement will be reached, and management can give no assurance that a work stoppage will not have a material adverse effect on the magnesia-based product segment’s interim or annual financial position or results of operations. The Corporation considers its relations with its employees to be good.

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MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended June 30, 2003

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

7.		Stock-Based Compensation
		The Corporation has stock-based compensation plans for employees and directors which are accounted for under the intrinsic value method prescribed by APB Opinion 25, Accounting for Stock Issued to Employees, and related Interpretations. The following table illustrates the effect on net earnings and earnings per share if the Corporation had applied the fair value recognition provisions of Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation:

8.		Adoption of Statement of Financial Accounting Standards No. 143, Accounting for Asset Retirement Obligations
		Effective January 1, 2003, the Corporation adopted Statement of Financial Accounting Standards No. 143, Accounting for Asset Retirement Obligations (“FAS 143”). FAS 143 requires the recognition of the fair value of a legally enforceable liability representing an asset retirement obligation in the period in which it is incurred. A corresponding amount is capitalized as part of the asset’s carrying amount. The asset retirement obligation is recorded at the acquisition date of a long-lived tangible asset if the fair value can be reasonably estimated. The Corporation incurs reclamation obligations as part of its aggregates mining process. Prior to the adoption of FAS 143, the Corporation generally expensed reclamation obligations in the period in which they were incurred.

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MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended June 30, 2003

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

8.		Adoption of Statement of Financial Accounting Standards No. 143, Accounting for Asset Retirement Obligations (Continued)
		The provisions of FAS 143 require the projected estimated reclamation obligation to include a market risk premium which represents the amount an external party would charge for bearing the uncertainty of guaranteeing a fixed price today for performance in the future. However, due to the average remaining quarry life exceeding 60 years on average at current production rates and the nature of quarry reclamation work, the Corporation believes that it is impractical for external parties to agree to a fixed price today. Therefore, a market risk premium has not been included in the reclamation liabilities.
		The estimated future reclamation obligations have been discounted to their present value and are being accreted to their projected future obligations via charges to operating expenses. Additionally, the fixed assets recorded concurrently with the liabilities are being depreciated over the period until reclamation activities are expected to occur. The accretion and depreciation expenses are included in other operating income and expenses on the consolidated statements of earnings.
		The cumulative effect of adopting FAS 143 was a charge of $6.9 million, or $0.14 per diluted share, which is net of a $4.5 million income tax benefit.
		The following shows the changes in the asset retirement obligation from January 1, 2003 to June 30, 2003 (amounts in thousands):

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MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended June 30, 2003

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

8.		Adoption of Statement of Financial Accounting Standards No. 143, Accounting for Asset Retirement Obligations (Continued)
		The following pro forma information presents the results of operations, excluding the cumulative effect of the accounting change for FAS 143, and the asset retirement obligation as if FAS 143 had been adopted on January 1, 2002 (amounts in thousands, except per share amounts):

9.		Accounting Changes
		In July 2002, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards No. 146, Obligations Associated with Disposal Activities (“FAS 146”). FAS 146 requires that a liability for a disposal obligation be recognized and measured at its fair value when it is incurred, including severance pay and other obligations. FAS 146 is effective for disposal activities initiated after December 31, 2002. The adoption of FAS 146 had no impact on the Corporation’s net earnings or financial position.
		In November 2002, the FASB issued Interpretation No. 45, Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others (“FIN 45”). FIN 45 requires that upon issuance of certain guarantees, the guarantor must recognize a liability for the fair value of the obligation it assumes under the guarantee. FIN 45 also enhances the disclosures of certain types of guarantees. The recognition provisions of FIN 45 were effective for guarantees issued or modified after December 31, 2002. The adoption of FIN 45 was not material to the Corporation’s net earnings or financial position.
		In January 2003, the FASB issued Interpretation No. 46, Consolidation of Variable Interest Entities (“FIN 46”). FIN 46 requires a new approach in determining if a reporting entity consolidates certain legal entities referred to as variable interests entities (“VIEs”), including joint ventures, limited liability corporations and equity investments. A VIE is an entity in which the equity investors do not have a controlling interest or has insufficient resources to finance the entity’s activities without receiving additional financial support from the other parties. Under FIN 46, consolidation of a VIE is required by the investor with the majority of the variable interests in the entity. FIN 46 is effective immediately for variable interests in VIEs created after January 31, 2003 and July 1, 2003 for variable interests in VIEs acquired prior to February 1, 2003. The adoption of FIN 46 is not expected to be material to the Corporation’s financial position or results of operations.

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MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended June 30, 2003

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

Second Quarter and Six Months Ended June 30, 2003 and 2002

OVERVIEW Martin Marietta Materials, Inc. (the “Corporation”), operates in two principal business segments: aggregates products and magnesia-based products. The Corporation’s net sales and earnings are predominately derived from its aggregates segment, which processes and sells granite, limestone, and other aggregates-related products from a network of approximately 360 quarries, distribution facilities and plants 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, 2002, filed with the Securities and Exchange Commission on March 27, 2003.

Pension Expense-Selection of Assumptions. The discount rate assumption selected at December 31, 2002 for the Corporation’s defined benefit pension plans was 6.75%. This assumption, combined with certain other assumptions and actual results for 2002, resulted in the Corporation recording a minimum pension liability of $12.2 million, which required a direct charge to shareholders’ equity at December 31, 2002 of $7.4 million, net of taxes. Pension expense for 2003, which is determined using the same assumptions, is estimated to be approximately $15.1 million for the year, representing an increase of $4.5 million over 2002 pension expense. In 2003, the average yield on high quality bonds, which is the basis of the discount rate assumption, has decreased approximately 50 basis points. If the discount rate selected at December 31, 2003 is 6.25%, and assuming an actual return on assets for the year of 8%, the Corporation expects the minimum pension liability to increase by approximately $12 million at December 31, 2003. This would require a net after-tax charge to shareholders’ equity of approximately $7 million for 2003. Any difference in the actual return on assets for the year as compared to 8% will impact the minimum pension liability, with a higher return resulting in a lower liability and vice versa. The discount rate at December 31, 2003 and the actual return on pension assets for the year then ended will be factors in determining 2004 pension expense.

Asset Retirement Obligations – Selection of Assumptions and Estimates. Effective January 1, 2003, the Corporation adopted Statement of Financial Accounting Standards No. 143, Accounting for Asset Retirement Obligations (“FAS 143”). This pronouncement requires recognition of a liability that represents an asset retirement obligation in the period in which it is incurred if a reasonable estimate of fair value can be made. A corresponding amount is capitalized as part of the fixed asset. FAS 143 is limited to obligations that are legally enforceable, whether due to law or statute, an oral or written contract, or under the doctrine of promissory estoppel. The Corporation, through its Aggregates segment, incurs reclamation obligations at most of its quarries.

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MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended June 30, 2003

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Second Quarter and Six Months Ended June 30, 2003 and 2002
(Continued)

The selection of asset retirement obligations as a critical accounting policy is due to the significant assumptions and estimates made by management in determining the asset retirement liability and the cumulative effect of the change in accounting principle. Further, the adoption of FAS 143 will result in additional depreciation expense and accretion expense annually.

The significant assumptions and estimates required in the adoption of FAS 143 include the following:

	•		Year quarry is expected to close. The estimated year of closure is when final reclamation occurs and is generally based on the remaining years of mineral reserves or the expiration of a lease. It is highly speculative to determine the year of closure of a quarry because changes in demand, the ability to extract additional mineral reserves or renewing a lease can affect the year of closure. On average, the Corporation has greater than 60 years of mineral reserves at its quarries based on current production rates.
	•		Total current reclamation costs. The Corporation has not closed many locations in its history. State performance bonding requirements and management’s experience and knowledge of the industry were used to estimate current reclamation costs.
	•		Inflation Rate. The inflation rate is applied to total current reclamation costs to estimate the reclamation costs at the time the quarries are closed. The Corporation assumed an annual inflation rate of 3%.
	•		Discount Rate. The estimated reclamation costs at the closing year were discounted back to January 1, 2003 to determine the initial asset retirement obligation. Further, the reclamation costs were discounted back to the year that the quarry was either initially mined or acquired to determine the initially recorded fixed asset. The discount rate should represent the Corporation’s credit-adjusted, risk-free rate of interest. This credit-adjusted, risk-free rate of interest for the Corporation ranged from 5.50% to 7.00%, depending on the term of the debt, for a period of ten to thirty years, respectively. The discount rate used in management’s estimate of reclamation cost was matched to the year a quarry was expected to close.

Using these estimates and assumptions, the cumulative effect of the change in accounting principle, fixed asset, accumulated depreciation and the asset retirement obligation were calculated for each of the Corporation’s locations that have an asset retirement obligation. At January 1, 2003, the following amounts were recorded in connection with the adoption of FAS 143:

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MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended June 30, 2003

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Second Quarter and Six Months Ended June 30, 2003 and 2002
(Continued)

Subsequent to the adoption of FAS 143, the Corporation will recognize annual depreciation expense, currently estimated at approximately $0.8 million, related to the fixed assets. Further, the Corporation will recognize annual accretion expense, currently estimated at approximately $1.0 million, as the asset retirement obligation is accreted to its future value. The assumptions and estimates related to FAS 143 will be updated as facts and circumstances change. Any changes will affect annual depreciation and accretion expenses.

RESULTS OF OPERATIONS Consolidated net sales for the quarter were $416.1 million compared to 2002 second quarter net sales of $413.8 million. Consolidated earnings from operations for the quarter were $70.2 million as compared to the record level of $80.9 million in the second quarter 2002. Earnings for the quarter were significantly affected by the extremely poor weather and operating conditions in addition to lower demand based on the weak construction-related economy. These conditions also resulted in decreased production volume which negatively affected earnings due to the underabsorption of fixed costs. Interest expense decreased 3% to $10.9 million for the second quarter 2003. Other nonoperating income and expenses, net, were an expense of $0.8 million compared to $8.5 million in the prior year. Consolidated after-tax earnings from continuing operations for the quarter were $39.8 million, or $0.81 per diluted share, compared to $42.8 million, or $0.88 per diluted share, in the second quarter 2002.

In 2002 and 2003, the Corporation divested of certain nonstrategic operations within its Aggregates operating segment with the 2003 divestitures being uncertain as of December 31, 2002. As such, the Corporation had a continuing financial interest in this certain group of assets and the related market served by these operations during 2002 and through the 2003 date of disposal. In the first quarter 2003, the divestiture resulted in discontinued operations and therefore the results of all operations through the date of disposal and any gain or loss on disposals are included in “(Loss) Earnings from discontinued operations” on the consolidated statements of earnings. The results of discontinued operations during the quarter and six months ended June 30, 2002 have been reclassified, as required, to conform to the 2003 presentation. For the quarter ended June 30, the discontinued operations included net sales of $0.4 million and $11.0 million in 2003 and 2002, respectively, and a pretax loss of $0.3 million in 2003 and a pretax gain of $23.2 million in 2002. The pretax loss for the quarter ended June 30, 2003 included a gain on disposal of $0.3 million. The pretax gain for the quarter ended June 30, 2002 included gains on disposals of $21.6 million.

Net earnings for the quarter ended June 30 were $39.7 million, or $0.81 per diluted share, in 2003 and $53.4 million, or $1.09 per diluted share, in 2002.

Consolidated net sales for the first six months of 2003 were $698.8 million compared to $695.4 million for the year-earlier period. On a year-to-date basis, consolidated earnings from operations were $61.0 million in 2003 compared with $81.2 million in 2002. Other nonoperating income and expenses, net, were expenses of $0.2 million in 2003 and $8.4 million in 2002. Interest expense decreased 6% in 2003 as compared to the prior year. Consolidated earnings from continuing operations for the six months ended June 30 were $26.9 million, or $0.55 per diluted share, in 2003 compared to $35.3 million, or $0.72 per diluted share, in 2002.

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MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended June 30, 2003

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Second Quarter and Six Months Ended June 30, 2003 and 2002
(Continued)

For the six months ended June 30, the discontinued operations included net sales of $1.1 million and $19.4 million in 2003 and 2002, respectively, and a pretax loss of $2.1 million in 2003 and a pretax gain of $18.0 million in 2002. The pretax gain for the six months ended June 30, 2002 included a gain on disposal of $21.6 million.

During the first quarter 2003, the Corporation recorded a $6.9 million, or $0.14 per diluted share, net charge as the cumulative effect of an accounting change related to the adoption of FAS 143. The first six months of 2002 were restated to reflect the $11.5 million, or $0.23 per diluted share, charge recorded as the cumulative effect of an accounting change related to the adoption of Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets. Consolidated net earnings for the first six months were $18.8 million, or $0.38 per diluted share, in 2003 as compared to $31.3 million, or $0.65 per diluted share, in 2002.

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 is based on results from continuing operations.

Net sales for the Aggregates division were $394.1 million for the second quarter of both 2003 and 2002. Average sales price at heritage aggregates operations increased 1.0 percent which was offset by a 1.9 percent decline in heritage aggregates shipments, most significantly in North Carolina and the Southwest due to the poor weather conditions and the weak economy. Pricing was negatively affected by product mix weighted to lower-value products. Gross margin for the division was 24.6 percent in 2003 compared with 26.9 percent in the year-earlier period, principally due to the underabsorption of fixed costs.

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

(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 a full year and divestitures.
(3)		Aggregates division includes all acquisitions from the date of acquisition and divested operations through the dates of divestiture.
(4)		Divestitures include the tons related to divested operations up to the dates of divestiture.