Page 76 - 2019 Annual Report

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
Income Tax Expense
Variances in the estimated effective income tax rates, when compared with the statutory corporate income tax rate, are due
primarily to the statutory depletion deduction for mineral reserves, the effect of state income taxes, stock compensation
deductions, and the impact of foreign income or losses for which no tax expense or benefit is recognized. Additionally, certain
acquisition-related expenses, net, have limited deductibility for income tax purposes.
The permanent benefit associated with the statutory depletion deduction for mineral reserves is typically the significant driver of
the estimated effective income tax rate. The statutory depletion deduction is calculated as a percentage of revenues subject to
certain limitations. Due to these limitations, changes in sales volumes and pretax earnings may not proportionately affect the
statutory depletion deduction and the corresponding impact on the effective income tax rate. However, the impact of the
depletion deduction on the estimated effective tax rate is inversely affected by increases or decreases in pretax earnings.
The Company’s estimated effective income tax rate for the years ended December 31, 2019 and 2018 was 18.2% and 18.3%, respectively.
The 2019 income tax rate reflects a discrete income tax benefit of $15.2 million related to a change in tax election for an
acquired entity. The 2018 income tax rate includes a net tax benefit of $18.9 million for the final true-up of the impact of the
2017 Tax Act.

Net Earnings Attributable to Martin Marietta and Earnings Per Diluted Share
Net earnings attributable to Martin Marietta were $611.9 million, or $9.74 per diluted share, for 2019 and $470.0 million, or
$7.43 per diluted share, for 2018.

Liquidity and Cash Flows
Operating Activities
Generally, the Company’s primary source of liquidity is cash generated from operating activities. Operating cash flow is
substantially derived from consolidated net earnings, before deducting depreciation, depletion and amortization, and offset
by working capital requirements. Cash provided by operations was $966.1 million in 2019 and $705.1 million in 2018. The
increase in cash provided by operations in 2019 compared with 2018 reflects higher earnings and lower contributions to the
Company’s pension plans. Cash provided by operations in 2018 reflects $162.3 million of contributions to the Company’s
pension plans, the majority of which is attributable to the 2017 plan year. As a result, the Company recognized a higher cash
tax benefit at the 35% federal tax rate in effect for the plan year. For comparative purposes, the Company made pension plan
contributions of $58.9 million in 2019.

Annual Report ♦ Page 74 Celebrating 25 Years as a Public Company