Page 171 - Martin Marietta - 2024 Proxy Statement

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
In 2023, asphalt pricing increased 6.7%. Shipments increased 3.5%, reflecting pent‐up demand in many of the Company's Arizona
and California markets.
Magnesia Specialties. In 2023, Magnesia Specialties reported total revenues of $315.4 million and gross profit of $97.1 million,
representing increases of 3.8% and 6.9%, respectively, compared with 2022. The profitability increase in 2023 reflects pricing gains
in both the lime and chemical product lines and lower energy costs, which more than offset higher repair costs and lower sales
volumes of chemical products.

Selling, General and Administrative Expenses
SG&A expenses for 2023 and 2022 were 6.5% and 6.4% of total revenues, respectively.

Other Operating Income, Net
Other operating income, net, is comprised generally of gains and losses on the sale of assets; recoveries and losses related to
certain customer accounts receivable; rental, royalty and services income; accretion expense, depreciation expense and gains and
losses related to asset retirement obligations. These net amounts represented income of $28.4 million in 2023 and $189.2 million
in 2022. In 2023, other operating income, net, included $19.5 million of gains on land sales. In 2022, other operating income, net,
included a $151.9 million pretax gain on the divestiture of the Colorado and Central Texas ready mixed concrete operations.

Earnings from Operations

Consolidated earningsfrom operations were $1.60 billion and $1.21 billion in 2023 and 2022, respectively.

Interest Expense
Interest expense was $165.3 million in 2023 and $169.0 million in 2022.

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 earningsfrom nonconsolidated investments and other
miscellaneous income and expenses. Consolidated other nonoperating income, net, was $62.1 million in 2023 and $53.4 million in
2022. In 2023, other nonoperating income, net, included $46.7 million of interest income and $8.9 million of third‐party railroad
track maintenance expense. Other nonoperating income, net, for 2022 included $13.6 million of interest income, a $12.0 million
pretax gain related to the repurchase of the Company's debt and $8.2 million of third‐party railroad track maintenance expense.

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 variance in the estimated effective income tax rate compared with the statutory 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, 2023 and 2022 was 19.6% and 21.5%,
respectively. The lower 2023 effective income tax rate versus 2022 was primarily driven by the impact of the divestiture of the
Colorado and Central Texas ready mixed concrete businesses in 2022.
The effective income tax rate for 2023 and 2022 included an $11.2 million and $10.3 million discrete benefit fromfinancing third‐
party railroad track maintenance, respectively. In exchange, the Company received a federal income tax credit and deduction.

2023 Annual Report ♦ Page 69