Martin Marietta Materials, Inc.

Good morning, ladies and gentlemen, and welcome to Martin Marietta's Third Quarter 2020 Earnings Conference Call. My name is Dallin, and I'll be today's coordinator. All participants are currently in a listen-only mode. A question and a suggestion will follow the company's prepared remarks. As a reminder, today's call is being recorded and will be available for replay on the company's website. I will now turn the call over to your host, Ms. Suzanne Offert, Martin Marietta's Vice President of Vestal Relations. Suzanne, you may begin.

Good morning, and thank you for joining Martin Marietta's third quarter 2020 earnings call. With me today are Ward Nye, Chairman and Chief Executive Officer, and Jim Nicholas, Senior Vice President and Chief Financial Officer. As a reminder, today's discussion may include forward-looking statements, as defined by United States securities laws in connection with future events, future operating results, or financial performance. Like other businesses, Martin Marietta is 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. Please refer 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. We have made available during this webcast and on the investor relations section of our website Q3 2020 supplemental information that summarizes our financial results and trends. In addition, any non-GAAP measures discussed today are defined and reconciled to the most directly comparable GAAP measure in our earnings release and FCC filings. Effective July 1, in connection with us streamlining our operating structure, we also changed our reportable segments. Our building materials business now consists of the East Group, whose operations were previously reported in the Mid-America and Southeast Groups, and the West Group, which had no significant changes. In addition, the Magnesia Specialties business comprises our third reportable segment. Prior year results have been revised to conform with this new reporting structure. Today's earnings call will begin with Ward Nye, who will discuss our third quarter operating performance and market trends as we move toward 2021. Jim Nicholas will then review our financial results and liquidity position, and then Ward will provide some closing comments. A question and answer session will follow our prepared remarks. I will now turn the call over to Ward.

Thank you, Suzanne, and thank you all for joining today's teleconference. We sincerely hope that you and your families are safe and healthy. Martin Marietta's strong business execution and commitment to operational excellence provide the foundation for our company to consistently deliver record financial, operational, and safety performance. As highlighted in today's release, we established new profitability and safety records for the first nine months of 2020. Year-to-date, gross profit increased to $927 million and adjusted earnings before interest, taxes, depreciation, and amortization, or adjusted EBITDA, surpassed the $1 billion mark. We have also achieved the best safety performance in Martin Murrieta's history with a company-wide loss time and total entry incident rates exceeding world-class levels. For the third quarter, increased pricing across all product lines and disciplined cost management helped mitigate anticipated shipment declines driven by the COVID-19 pandemic. Third quarter financial highlights as compared with the prior year period included Consolidated gross margin increased 100 basis points to a record, 30.6%, despite a 7% reduction in revenues, demonstrating the resiliency of our business and our focus on cost control. Selling, general, and administrative, or SG&A, expenses as a percentage of total revenues improved 10 basis points to an industry-leading 5.4%. Adjusted EBITDA was $502 million, inclusive of $70 million of non-recurring gains, and diluted earnings per share was $4.71. For clarity, the non-recurring gains contributed 87 cents per diluted share. These results are a testament to our dedicated and talented employees who are managing through today's challenging public health and economic environment as well as the proactive steps we have taken to adjust the company's cost profile. Now, for a review of our third quarter operating performance, aggregate shipments declined nearly 9% versus a robust prior year comparison. As anticipated, given the widespread COVID-19 disruptions across the United States, shipment declines were experienced across our footprint, with the East Group down 9% and the West Group down 8%. Additionally, the East Group shipments were impacted by weather-delayed projects in the Carolinas, Georgia, and Florida, anticipated lower infrastructure shipments in portions of North Carolina, and reduced wind energy activity in Iowa. Wet weather in Texas and lower energy sector demand negatively impacted West Group shipments. In line with broader macroeconomic trends, aggregate shipments to both the infrastructure and non-residential markets declined. Shipments to the residential market improved modestly. Aggregates average selling price increased 2.7 percent or 4 percent on a mixed adjusted basis, underscoring this product line's resilient pricing power. By region, the East Group posted a 4.4 percent pricing increase with strength in our key geographies of North Carolina, Georgia, Iowa, Indiana, and Maryland. The West Group average selling price declined slightly, reflecting a lower percentage of higher price shipments from distribution yards. We continue to see attractive pricing in both Texas and Colorado. On a mix-adjusted basis, the West Group average selling price improved nearly 4%. As a reminder, we anticipate overall full-year 2020 aggregates pricing growth of 3% to 4%. Underlined demand for our Texas-based cement business remains positive, supported by diversified customer backlogs and large project activity. Third-quarter cement shipments, however, decreased 4 percent, reflecting continued energy sector headwinds. Reported cement pricing increased 1 percent, while average selling prices for our core cement products, namely Type I and Type II cement, were up $4 over the prior year period Lower shipments of oil well and lightweight specialty cements found for West Texas disproportionately impacted overall pricing growth. As a reminder, specialty cements can sell for over $200 per ton. On a mixed suggested basis, overall cement pricing increased 3.4%. Turning to our targeted downstream businesses, ready-mix concrete shipments decreased 4%, excluding acquired shipments and third-quarter 2019 shipments from our Southwest Division's concrete business in Arkansas, Louisiana, and eastern Texas, which we divested earlier this year. Texas construction activity was hindered by wet weather. By contrast, Colorado shipments benefited from favorable weather and continued activity on a large Amazon fulfillment center. Favorable geographic mix from robust Colorado shipments was the primary driver of the 2% increase in third quarter concrete pricing. Asphalt shipments for our Colorado asphalt and paving business decreased 3% following near record levels in the prior year period. Asphalt pricing increased 6%, reflecting a higher percentage of attractively priced specialty asphalt mixed sales. For our magnesia specialties business, weakness in chemicals and lime demand began to moderate during the quarter as steel utilization rebounded from June's trough. We expect continued improvement through the balance of the year. Before discussing our preliminary 2021 outlook, I'll now turn the call over to Jim to conclude our third quarter discussion with a review of our financial results and liquidity. Jim?