It takes true grit to be in aggregate.

• Position: Martin Marietta Materials Inc.

Martin Marietta Materials Inc.? Five words: Intermodal Surface Transportation Efficiency Act (ISTEA).

The 1992 federal legislation substantially increased funding for the nation's highways through 1997. And Martin Marietta Materials (NYSE-MLM), the country's second-largest producer of construction aggregates - the crushed stone, sand and gravel used in making concrete for highways and buildings - has gotten a sizable share of the funds.

Last year, government infrastructure spending accounted for about half of Martin Marietta's $383 million aggregate business, and some analysts think road building the next two to three years will keep the company's growth strong even if the rest of the construction industry slides into a recession.

"Their markets are growing much faster than the industry average, and much faster than the industry historically," says John Bermudez of Merrill Lynch in New York. "They're in high-growth states like Georgia and the Carolinas where things are working out quite well. In Georgia, there's so much construction you can't even see blacktop anymore. The roads are basically covered with red clay."

Martin Marietta, which has been in acquisition mode for the past decade, operates more than 200 quarries and distribution centers in 20 states. In addition to the Carolinas and Georgia, it has significant operations in the Midwest, particularly Iowa and Kansas. This year it acquired Dravo Corp. of Pittsburgh, which added quarries along the Ohio and Mississippi rivers and in Alabama and the Bahamas.

When Congress passed the ISTEA (or Ice Tea, as the industry affectionately calls it), the act gave strong impetus to state highway-construction spending. For 1992 through 1997, it authorized spending of $121 billion, nearly double the $69 billion authorized during 1987-91. Actual spending is even higher, because states typically put up matching funds of 10% to 50% of the federal money.

Against this backdrop, Martin Marietta's parent company - aerospace giant Martin Marietta Corp. - decided to spin off a minority share in the materials company to the public. In February 1994, it sold 8.8 million shares (about 19% of the total), raising $189 million in capital.

Ironically, the parent - which has since merged with Lockheed to become Bethesda, Md.-based Lockheed Martin - was being hurt by government cutbacks of the defense and aerospace projects that are its bread and butter. That helped prompt it to do the spinoff, says Janice K. Henry...