Martin Marietta Materials, Inc.

Good morning, ladies and gentlemen, and welcome to Martin Marietta's second quarter 2021 earnings conference call. All participants are now 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 and will be available for replay on the company's website. I will now turn the call over to Ms. Suzanne Osberg, Martin Marietta's Vice President of Investor Relations. Suzanne, you may begin.

Good morning, and thank you for joining Martin Marietta's second quarter 2021 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've made available during this webcast and on the investor relations section of our website, Q2 2021 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 SEC filings. Ward and I will begin today's earnings call with a discussion of our second quarter operating performance and current market trends, as well as our recently announced acquisitions. Jim Nicholas will then review our financial results, after which Ward will provide some brief concluding remarks. 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. Martin Marietta has once again reported impressive results, extending our strong track record of industry-leading performance and responsible growth. We delivered record profitability and the best safety performance in our company's history through the first half of the year. We're also making notable progress on our SOAR 2025 initiatives to further enhance our ability to capitalize on growing construction activity and favorable pricing dynamics in the post-pandemic landscape. We're confident about Martin Marietta's prospects for the remainder of 2021. In May, we announced an agreement to acquire Lehigh Hanson's West Region. Those of you who joined us earlier this year for our Investor Day were likely not surprised when you read the announcement. The acquisition, which is consistent with and advances SOAR 2025, provides a new upstream materials-led platform in three of the Western United States' largest and fastest-growing megaregions, With this leading Pacific presence, we'll be well positioned to capitalize on long-term demand drivers from increased state infrastructure investment in California and Arizona, as well as continued private sector growth across these regions. This strategic acquisition also provides Martin Marietta with an enhanced coast-to-coast geographic footprint and serves as a valuable platform for potential continued geographic expansion. We expect to close the transaction in the second half of 2021 following customary closing conditions. We look forward to welcoming the Lehigh West Region team to Martin Marietta. We're also very pleased with the performance of our recently acquired tiller operations in the Minneapolis-St. Paul region, which exceeded management's initial expectations since closing on April 30th. Tiller contributed 1 million tons each of aggregates and asphalt during May and June and provides Martin Marietta an upstream materials platform in one of the largest and fastest growing Midwestern metropolitan areas while also expanding and complementing our product offerings in our existing operations and surrounding markets. Integration into our central division is underway and synergy realization is progressing as planned. This business remains on track to contribute $60 million of adjusted EBITDA this year. Martin Marietta has established a long track record of superior value creation by prudently balancing inorganic growth opportunities while maintaining our strong balance sheet and returning capital to shareholders. Our latest acquisitions and successful growth initiatives demonstrate that SOAR and our disciplined capital deployment strategy continue to deliver significant value to our shareholders, customers, and other stakeholders, positioning our company for sustainable long-term operational and financial success. Now, let's turn to the company's second quarter performance. We achieved record second quarter revenues, gross profit, adjusted EBITDA, and earnings per diluted share, driven by strengthening product demand, pricing gains across all product lines, and meaningful contributions from the recently acquired Tiller acquisition. On a consolidated basis, products and services revenues increased 9% to $1.3 billion. Adjusted gross profit increased 3% to $393 million. Adjusted EBITDA increased 8% to $439 million. And adjusted diluted earnings per share increased 9% to $3.81. Our building materials business continued to benefit from single-family housing growth, infrastructure investment, and heavy industrial projects of scale. Adverse weather, however, muted shipments, most notably in our top two revenue-generating states. Our aggregates, cement, and ready-mix concrete operations in Texas experienced lower than expected shipment levels as a result of excessive rainfall. In fact, the second quarter was Texas' 11th wettest on record. Additionally, Colorado, home to our front-range aggregates and downstream operations, surpassed average annual precipitation levels during the first half of the year. Second quarter aggregate shipments increased 1.5% on an organic basis and 3% in total. East group total shipments grew 7%. Strong demand across all end-use markets in the Carolinas, Georgia, Florida, and Maryland, combined with shipments from the acquired tiller operations, more than offset lower shipments in the Midwest from weather-induced project delays. West Group shipments declined nearly 4% as Mother Nature interrupted otherwise robust construction activity in both Texas and Colorado. Organic Aggregate's average selling price increased over 3%, supported by our value-over-volume pricing strategy led by the East Group. Geographic mix from a lower percentage of higher-priced long-haul shipments limited West Group's reported pricing gains. On a mix-adjusted basis, West Group pricing increased 2.4%. We announced mid-year price increases in a number of markets, which should further contribute to favorable pricing trends heading into next year. Our Texas cement business delivered solid operating performance despite significant precipitation that disrupted more than one-third of the quarter's available shipping days. Second quarter shipments declined less than 2% as major projects in South Texas, along with recovering energy sector activity, helped mitigate weather impacts. Notably, we established an all-time record for monthly cement shipments in June, largely due to the robust demand and construction activity throughout the Texas Triangle. Second quarter cement pricing increased 7% or 4% on a mix-adjusted basis as annual increases went into effect on April 1. Additionally, we've announced a second price increase of $8 per ton on September 1 for both North and South Texas. This represents the first mid-year increase since 2014. Attractive demand drivers, continued market tightness, and diversified customer backlogs will support sustainable construction activity and pricing for our Texas cement operations over the next several years. Turning to our targeted downstream businesses, ready-mix concrete shipments increased 8% despite significant weather headwinds driven by incremental volume from large non-residential projects and operations acquired last year in Texas. Concrete pricing increased modestly, reflecting geographic mix from a higher percentage of lower-priced Texas shipments. Overall asphalt shipments increased 68%, driven by contributions from the tiller operations, which more than offset weather-related shipment declines in our Colorado asphalt and paving business. Colorado market fundamentals remain strong, supported by healthy bidding activity and overall customer optimism. Organic asphalt pricing improved 4%. Looking ahead, we remain confident that Martin Marietta's attractive market fundamentals and accelerating long-term secular demand trends across our three primary end-use markets will drive increased levels of building activity and continued favorable pricing trends in the second half of 2021 and into the future. Demand for our construction products is growing, and we have both the ability and capacity to supply the needed building materials. However, transient contractor labor and supply shortages, compounded by weather-deferred days that become increasingly difficult to recover as the year advances, can govern the near-term pace of overall construction activity. Fortunately, we expect work not completed this year to simply be pushed into 2022 and foresee bottlenecks like these moderating and throughput improving as federal unemployment benefits expire in September. We're also in the midst of the most significant, seemingly bipartisan national infrastructure debate in a long time, with a number of proposals from both political parties to advance and address much-needed investment. Regardless of the pathway to successor infrastructure legislation, all proposals provide for sizable increases in federal surface transportation funding over the Fixing America's Surface Transportation, or FAST Act, We're optimistic that meaningful progress in Washington, D.C. will be made, and a FAST Act replacement will be passed before its expiration in September. Such legislation would immediately stimulate economic growth, contractor optimism, and job creation, while also driving meaningful product demand starting in late 2022 and beyond. Our company's top five states' Department of Transportation, or DOTs, are well positioned to put increased transportation dollars to work. More specifically, Texas, Colorado, North Carolina, Georgia, and Florida, which accounted for over 70% of our 2020 building materials revenues, have an abundance of projects in their backlog that would benefit from higher federal funding and generate growing demand for our products. At the same time, increased visibility and funding certainty at the federal level supports a healthy pricing environment for construction materials. For reference, aggregate shipments to the infrastructure market accounted for 34% of second quarter shipments, well below our 10-year historical average of 43%. Non-residential construction continues to benefit from increased investment in aggregates intensive heavy industrial warehouses and data centers. We're also beginning to see early signs of recovery in the more COVID-19 impacted light commercial and retail sectors, notably in key markets such as Denver, Atlanta, and the Texas Triangle. Light non-residential activity should be a more significant demand driver in 2022 given the attractive drag-along effects of strong single-family residential growth. Aggregate shipments to the non-residential market accounted for 36% of second-quarter shipments. Martin Marietta continues to be a beneficiary of single-family housing growth across the southeast and southwest. Single-family starts remain strong, despite higher home prices and longer material delivery times, supported by significant underbuilding over the past decade, low mortgage rates, and accelerated de-urbanization trends. Importantly, single-family housing is two to three times more aggregates-intensive than multifamily construction over given the ancillary non-residential and infrastructure needs to build out new or expanding suburban communities. Aggregates to the residential market accounted for 25% of second quarter shipments. I'll now turn the call over to Jim to discuss more specifically our second quarter financial results. Jim?