Martin Marietta Materials, Inc.

Good morning, ladies and gentlemen, and welcome to the Martin Marietta's third quarter 2019 earnings conference call. My name is Crystal, and I'll be your coordinator today. All participants are currently 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 will now 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 third quarter 2019 earnings call. With me today are Ward and I, 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 Q3 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 third quarter 2019. Any comparisons are versus the prior year third quarter, and all margin references are based on revenues. Furthermore, non-GAAP measures are defined and reconciled to the nearest GAAP measure in our Q3 2019 Supplemental Information and SEC filings. We will begin today's earnings call with Ward and I, who will discuss our third quarter operating performance as well as market trends as we conclude 2019 and head into 2020. Jim Nicholas will then review our financial results. A question and answer session will follow. With that, I will now turn the call over to Ward.

Thank you, Suzanne, and thank you all for joining today's teleconference. This morning, we released record-setting third quarter results. Martin Marietta's disciplined execution of our long-term strategic plan, together with our commitment to operational excellence, provides a foundation for our company to consistently deliver industry-leading performance. We were able to once again establish new quarterly company records for revenues and profits and year-to-date records for safety. We expect that trend will continue for the remainder of 2019, keeping us on track to announce record four-year results when we report next quarter. In short, Martin Marietta is safer and more profitable than ever. Driven by widespread improvements in shipments, pricing, and profitability across most of our boiling materials business, we delivered outstanding third quarter performance. Consolidated total revenues increased 16% year-over-year to $1.4 billion. Consolidated gross profit increased 34% to $421 million. Adjusted earnings before interest, taxes, depreciation, and amortization, or adjusted EBITDA, increased 27% to $439 million. And fully diluted earnings per share was $3.96. a 39% improvement. Supported by their strong performance and encouraging trends, we raised the midpoint of our full year 2019 adjusted EBITDA guidance to $1,275,000,000. We've consistently observed that attractive market fundamentals, including employment gains, favorable population trends, and superior state fiscal health, promote sustainable and long-term construction growth. Mindful of these vital attributes, we have purposefully positioned our business, geographically and otherwise, to be aggregates led in high-growth markets. We've also aligned our product offerings to leverage our strategic cement and targeted downstream opportunities. This proven strategy, combined with our pricing discipline, underscores our continued ability to capitalize on the robust underlying demand in our key states. That's why we remain confident that increased infrastructure activity from state and local transportation funding initiatives, together with continued strength in private sector activity, will support steady, sustainable construction growth in our top ten states that outpaces the nation as a whole for the foreseeable future. With that as a backdrop, let's review our third quarter operating results in more detail. Robust product demand and favorable weather led to a 12% increase in aggregate shipments. Notably, all divisions and primary end-use markets contributed to this growth, demonstrating strong underlying demand and our ability to capitalize on it. Aggregate shipments to the infrastructure market increased 7%. As anticipated, shipments for transportation-related projects meaningfully accelerated in our key states of North Carolina, Iowa, and Maryland, supported by funding provided by the Fixing America's Circus Transportation Act, or FAST Act, and numerous state and local transportation initiatives. We anticipate public construction, particularly for aggregates-intensive highways and streets, to continue benefiting from the acceleration of state lettings and contract awards in our key states and ongoing federal and state funding. While a successor infrastructure bill has yet to be fully agreed upon by our elected representatives, all indications are that federal transportation funding will continue at a minimum at status quo levels even if the FAST Act expires by its own terms in September 2020 without the immediate passage of multi-year follow-on legislation. We see little appetite for recurrence of the series of short-term continuing resolutions seen prior to the enactment of the FAST Act in December of 2015. This sentiment is evident in the Senate Environment and Public Works Committee's July 2019 draft of a highway authorization bill. This bipartisan effort, backed by both Republican Chairman John Barrasso of Wyoming and ranking member Democrat Tom Carper of Delaware, proposes authorizing federal highway funding at $287 billion over the next five years. a 28% increase over the previous authorization's funding levels. Further, the expectation is that the United States House of Representatives Transportation and Infrastructure Committee will propose investment levels even higher than those offered from the Senate. Accordingly, we believe the necessary confidence and funding security is in place for states to continue to move forward on planned and future construction projects. Furthermore, particularly in the near term, state-level funding should continue to grow at a faster rate than federal funding, leading to additional infrastructure investment benefiting Martin Mariano. As a reminder, 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. The infrastructure market represented 38% of our third quarter aggregate shipments, which was below the company's most recent 10-year annual average of 46%. Since infrastructure is Martin Marietta's most aggregate-intensive end use, the public works growth we're seeing and expecting is encouraging. Aggregate shipments to the non-residential market increased 19%. with broad-based strength and distribution center, warehouse, data center, and wind energy projects in Texas, the Carolinas, Iowa, and Maryland. Additionally, we benefited from the reemergence of several large energy sector projects along the Texas Gulf Coast, which accounted for nearly 500,000 tons of aggregate shipments during the quarter. Looking ahead, we believe continued employment and population gains will provide the impetus for sustainable commercial construction activity, particularly in our southeastern and southwestern regions. The non-residential market represented 34% of our third quarter aggregate shipments. Aggregate shipments to the residential market increased 16%, led by attractive home building activity in Texas, Colorado, the Carolinas, Georgia, and Florida. Among other things, home builders are now noting improved demand from first-time buyers. We expect continued residential construction growth for both single and multifamily housing across our geographic footprint, driven by favorable population demographics, job growth, land availability, attractive mortgage rates, and efficient permitting. Currently, permit growth, which in our view is the best indicator of future housing construction activity, is outpacing the national average for both multifamily and single-family housing units in our top ten states. The residential market accounted for 22% of our third quarter aggregate shipments. To conclude our discussion on end-use markets, the Kenrock rail market accounted for the remaining 6% of aggregate shipments. Volumes increased 4%, driven by improved balance shipments to the class 1 railroads for continued repair projects from the flooding in the Midwest earlier this year. Based on recent trends and our year-to-date volume growth, we raised our full year 2019 aggregate shipments guidance from an increase of 8% to 10% to an increase of 11% to 12%. Aggregates pricing improved 5%, reflecting our disciplined pricing strategy and the comparative strength of our markets. By region, the West Group posted aggregates pricing growth of 9%, which reflects favorable geographic mix and product mix. The Southeast Group achieved pricing growth of nearly 6%, driven by market strength and a higher percentage of long-haul shipments from our higher-priced distribution terminals. Our focus on pricing led to a 3.5% improvement for the Mid-America Group. Full-year 2019 aggregates pricing is anticipated to increase 4% to 5%. We expect continued pricing momentum in 2020. Our cement shipments increased 21% to a new quarterly volume record of 1.1 million tons, driven by healthy Texas demand as well as weather-deferred projects from earlier in the year. Cement pricing improved nearly 2% despite unfavorable product mix from a lower percentage of oil well cement shipments. With a robust bidding pipeline, we believe our cement operations will continue to benefit from tight supply and healthy demand in Texas, as well as our recently announced price increase, effective April 2020. Turning to our downstream businesses, wet and mixed concrete shipments increased 9%, led by double-digit growth in the Southwest Division. Our Rocky Mountain Division experienced project delays, which tempered shipment growth, Pricing defined 2% overall as unfavorable product mix and a shift in Texas customer segmentation affected pricing and offset solid pricing gains in Colorado. Our asphalt and paving business, which operates solely in Colorado, benefited from strong customer backlogs and favorable weather conditions, resulting in a 34% increase in asphalt shipments. Asphalt pricing improved 3%. I'll now turn the call over to Jim to discuss more specifically our third quarter financial results. Jim?