Martin Marietta Materials, Inc.

Good morning, ladies and gentlemen, and welcome to Martin Marietta's second quarter 2019 earnings conference call. My name is Catherine, and I'll be your coordinator today. At this time, all participants have been placed in a listen-only mode. A question-and-answer session will follow the company's prepared remarks. As a reminder, today's call is being recorded. I would now like to turn the call over to your host, Ms. Suzanne Osberg, Vice President of Investor Relations for Martin Marietta. Ms. Osberg, you may begin.

Good morning and thank you for joining Martin Marietta's second quarter 2019 earnings call. With me today are Ward Nye, Chairman and Chief Executive Officer, and Jim Nicholas, Senior Vice President and Chief Financial Officer. To facilitate today's discussion, we have made available during this webcast and on the investor relations section of our website, Q2 2019 supplemental information that summarizes our quarterly results and trends. As detailed on slide two, This conference call may include forward-looking statements as defined by securities laws in connection with future events, future operating results, or financial performance. Like other businesses, we are subject to risks and uncertainties that could cause actual results to differ materially. Except as legally required, we undertake no obligation to publicly update or revise any forward-looking statements, whether resulting from new information, future developments, or otherwise. we refer you to the legal disclaimers contained in today's earnings release and other filings with the Securities and Exchange Commission, which are available on both our own and the SEC websites. Unless otherwise noted, all financial and operating results discussed today are for the second quarter 2019. Any comparisons are versus the prior year's second quarter, and all margin references are based on revenues. When providing certain comparisons with prior periods, We have excluded the operating results of acquired businesses that do not have comparable results in the periods being discussed. We refer to these comparisons as same-store information. Furthermore, non-GAAP measures are defined and reconciled to the nearest GAAP measure in our Q2 2019 Supplemental Information and SEC filings. We will begin today's earnings call with Ward Nye, who will discuss our second quarter operating performance as well as market trends. Jim Nicholas will then review our financial results. A question and answer session will follow. I will now turn the call over to Ward.

Thank you, Suzanne, and thank you all for joining today's teleconference. We're proud to report second quarter results that established new company records for revenues, gross profit, and adjusted earnings before interest, taxes, depreciation, and amortization, or adjusted EBITDA. Driven by double-digit aggregate shipments growth, continued pricing momentum across our building materials business, and improved cost control, consolidated total revenues increased 6% to $1.3 billion, adjusted EBITDA to $378 million, and fully diluted earnings per share to $3.01. This impressive second quarter performance underscores Martin Marietta's strong execution and superior strategic position, which are allowing us to capitalize on the strength of product demand in our key regions. Attractive market fundamentals, including notable employment gains, population growth, and superior state fiscal health, continue to promote steady and sustainable construction growth and favorable pricing trends across our geographic footprint in the second quarter. Consistent with our expectations, construction growth in our top ten states is outpacing the nation as a whole. We anticipate further acceleration in construction activity during the second half of this year, supported by strength in public and private sector spending. These attractive dynamics, combined with our strong first-half performance, position Martin Marietta for increased shipments, pricing, and profitability, and underpin our confidence that we will deliver another record year. That's why, as announced in today's release, we raised the midpoint of our full year adjusted EBITDA guidance by $32.5 million. Our second quarter results can best be summarized as a tale of two geographies. Much of Martin Marietta's eastern footprint, most notably North Carolina, Georgia, Maryland, as well as Iowa, benefited from robust underlying demand as customers continued to address weather-deferred projects that and growing backlogs. By contrast, the company's two largest states by revenues, Texas and Colorado, experienced extreme weather patterns during the quarter that hindered construction activity and negatively impacted our aggregates, cement, and downstream operations in these regions. Aggregate shipments increased 10% for the company as a whole, or 6% on a same-store all divisions achieved growth with the exception of our southwest division, which had relatively flat shipment volumes. Equally important, for a second consecutive quarter, we saw improved shipments across all three of our primary end-use markets. Aggregate shipments to the infrastructure market increased 2% as contractors advanced transportation-related projects. However, major infrastructure initiatives in Texas and Colorado were delayed due to weather, thereby limiting overall gains in the quarter. We expect public construction, particularly for aggregates-intensive highways and streets, to accelerate throughout the remainder of the year, supported by meaningful increases in lettings and contract awards in a number of our key states, notably Texas, Colorado, and Maryland, and continued funding from the Fixing America's Surface Transportation Act, or FAST Act. We're encouraged by the two-year budget deal that was reached last week in Washington, D.C. With that agreement now in place, we believe federal transportation funding will continue at a minimum at status quo levels. That's even absent the prospective passage of a successor infrastructure bill prior to the FAST Act's September 2020 expiration, an area the Senate Environment and Public Works Committee is currently making progress. This should provide the necessary confidence and structure for states to continue to move planned and future construction projects forward. Additionally, our top ten states, which accounted for 85% of total building materials revenues in 2018, have all introduced incremental transportation funding measures within the last five years. State-level funding is expected to continue to grow at a faster rate than federal funding in the near term, leading to additional growth opportunities for our company. The infrastructure market represented 37 percent of our second quarter aggregate shipments, which was below the company's most recent 10-year annual average of 46 percent. Aggregate shipments to the non-residential market increased 25 percent, with strength in distribution center, warehouse, data center, and wind energy projects in Texas, the Carolinas, Georgia, Iowa, and Maryland. Additionally, we're benefiting from the reemergence of large energy sector projects along the Texas Gulf Coast. Looking ahead and consistent with third-party forecasts, including the Dodge Momentum Index, our non-residential outlook remains positive and projects healthy commercial construction activity, particularly in our southeastern and southwestern regions. The non-residential market represented 37% of our second quarter aggregate shipments. Aggregate shipments to the residential market increased modestly with attractive home building activity in the Carolinas, Georgia, and Florida, offset by weather-impacted delays in Texas. Despite the recent decline in housing unit starts at the national level, we expect residential construction will continue to grow within Martin Marietta's geographic footprint, driven by favorable population demographics, job growth, land availability, attractive mortgage rates, and efficient permitting. In our view, the issuance of residential permits represents the best indicator of future housing construction activity. Currently, permit growth for our top 10 states is outpacing the national average for both multifamily and single-family housing units. The residential market accounted for 21 percent of aggregate shipments. To conclude our discussion on end-use markets, the Chemrock rail market accounted for the remaining 5% of aggregate shipments. Volumes increased 11%, driven by improved ballast shipments to the western Class I railroads for emergency flood repairs, notably in Colorado and the Midwest. Based on our year-to-date performance and current trends, we also raised our full-year aggregate shipment guidance from an increase of 6% to 8% to an increase of 8% to 10%. In line with internal expectations, aggregates pricing improved 3.4%. On a same-store basis, pricing improved 4.1%. As a reminder, selling prices for operations acquired during the second quarter of 2018 are approximately 15% below the company's overall average. Our goal is to move pricing for these operations to be more in line with our broader company selling prices. By region, our Southeast group achieved same-store pricing growth of 8%, reflecting strong underlying demand in North Georgia and a higher percentage of long-haul shipments from our higher-priced distribution terminals. Continued discipline led to aggregate pricing improvements of 3% for both the West group and the Mid-America group when compared on a same-store basis. We expect overall pricing growth to accelerate throughout the remainder of 2019 now that a significant portion of prior-year weather-deferred projects have rolled off our backlogs and implemented price increases are realized. Cement shipments declined 5 percent, driven by extreme precipitation in Texas, most significantly in Dallas-Fort Worth, while pricing improved 5 percent. Underlying demand and the bidding pipeline remain robust and we believe our cement operations will continue to benefit from the tight supply in Texas. Turning to our downstream businesses, despite growing customer backlogs, ready-mix concrete shipments decreased nearly 16% as unfavorable weather conditions in Texas and Colorado hindered construction activity in these states. Pricing improved 3% following annual price increases that became effective on April 1st. Our asphalt and paving business, which operates solely in Colorado, experienced reduced production days from persistent extreme weather, including unseasonable May snowfall, resulting in an 8% reduction in asphalt shipments. Asphalt pricing improved 5%, reflecting strong bidding activity and customer confidence. We believe it will be challenging for our downstream businesses, particularly in Colorado, to wholly make up weather-deferred shipments in the second half of the year, given the remaining available operating days in the calendar year and the typical seasonal constraints. However, we expect any weather-deferred work not completed over the balance of 2019 will be pushed into 2020. I'll now turn the call over to Jim to discuss the specifics of our second quarter financial results.