Page 173 - Martin Marietta - 2023 Proxy Statement

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

Interest Expense
Interest expense was $169.0 million in 2022 and $142.7 million in 2021. The increase reflected a full‐year of interest on the
$2.5 billion of publicly traded debt the Company issued in July 2021 to help finance acquisition activity.

Other Nonoperating Income, Net
Other nonoperating income, net, is comprised generally of interest income; foreign currency transaction gains and losses;
pension and postretirement benefit cost (excluding service cost); net equity earnings from nonconsolidated investments and
other miscellaneous income and expenses. Consolidated other nonoperating income, net, was $53.4 million in 2022 and $24.4
million in 2021. Other nonoperating income, net, for the year ended December 31, 2022 included a $12.0 million pretax gain
related to the repurchase of the Company's debt, $8.2 million of third‐party railroad track maintenance expense and a $13.3
million increase in interest income.

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 offoreign income or losses for which no tax expense or benefit is recognized. Additionally, certain
acquisition‐related expenses have limited deductibilityfor 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, 2022 and 2021 was 21.5% and 17.9%,
respectively. The higher 2022 effective income tax rate versus 2021 was primarily driven by the impact of the divestiture of the
Colorado and Central Texas ready mixed concrete businesses.
The effective income tax rate for 2022 and 2021 included a $10.3 million and $9.7 million discrete benefit from financing third‐
party railroad track maintenance, respectively. In exchange, the Company received a federal income tax credit and deduction.

Discontinued Operations
The Company classified its Tehachapi cement plant, related cement terminals and its California ready mixed concrete
businesses acquired as part of Lehigh West Region as assets held for sale and discontinued operations as of and for the years
ended December 31, 2022 and 2021. Additionally, the Redding cement plant, related cement terminals and 14 ready mixed
concrete plants that were classified as discontinued operations as of and for the year ended December 31, 2021 were sold in
June 2022. The collective businesses generated earnings of $10.5 million and $0.5 million, respectively, net of expenses
associated with the planned disposal, the impact of selling acquired inventory after its step up to fair value as part of acquisition
accounting and income tax expense.

Net Earnings Attributable to Martin Marietta and Earnings Per Diluted Share
Net earnings from continuing operations attributable to Martin Marietta were $856.3 million, or $13.70 per diluted share, for
2022 and $702.0 million, or $11.21 per diluted share, for 2021.

Liquidity and Cash Flows
Operating Activities

enerally, 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 $991.2 million in 2022 and $1.14 billion in 2021. The primary
drivers of the decrease in cash provided by operations in 2022 were increased cash taxes and changes in working capital.

Annual Report ♦ Page 69