Martin Marietta Materials, Inc.

Hello and welcome to Martin Marietta's third quarter 2022 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 your host, Ms. Jennifer Park, Martin Marietta's Vice President of Investor Relations. Jennifer, you may begin.

Good morning. It's my pleasure to welcome you to Martin Marietta's third quarter 2022 earnings call. Joining me today are Ward Nye, Chairman and Chief Executive Officer, and Jim Nicholas, Senior Vice President and Chief Financial Officer. 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. We undertake no obligation except as legally required 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 public filings, which are available on both our own and the Securities Exchange Commission's website. We have made available during this webcast and on the investor section of our website Q3 2022 supplemental information that summarizes our financial results and trends. As a reminder, all financial and operating results discussed today are for continuing operations. In addition, non-GAAP measures are defined and reconciled to the most directly comparable GAAP measure in the appendix to the supplemental information, as well as our filings with the SEC and are also available on our website. Ward and I will begin today's earnings call with a discussion of our third quarter operating performance and portfolio optimization efforts. Jim Nicholas will then review our financial results and capital allocation, after which Ward will conclude with end market trends and our preliminary outlook for 2023. The question and answer session will follow. Please limit your Q&A participation to one question. I will now turn the call over to Ward.

Thank you, Jenny. Good morning, everyone, and thank you for joining today's teleconference. I'm pleased to report that Martin Marietta delivered record results in the third quarter. This is despite current macroeconomic challenges that include persistent inflationary pressure across multiple cost categories, tighter monetary policies, and heightened geopolitical tensions. Our quarterly performance is a testament to our team's commitment to commercial excellence and execution of our strategic business plan. The results also reflect our successful implementation of double-digit pricing growth across all building materials product lines. combined with acquisition contributions, drove record quarterly consolidated total revenues, gross profit, adjusted EBITDA, and adjusted earnings per diluted share. Importantly, too, our year-to-date safety and health performance, inclusive of acquired operations, remains at world-class levels as measured by both total injury and lost time incident rates. While we acknowledge and celebrate our continuous safety and health improvement, Our work in this vital dimension is never done. In addition, on August 9th, we entered into a definitive agreement to sell our Tehachapi, California cement plant and related distribution terminals to CalPortland Company for $350 million, subject to regulatory approval and customary closing conditions. This transaction aligns with our commitment to an aggregates-led business complemented by strategic cement assets in certain markets, improves the durability of our business through cycles, and provides balance sheet flexibility to continue driving shareholder value. Our capital allocation priorities remain focused on prudent investment and attractive acquisitions, organic growth initiatives, and returning capital to shareholders while reducing net leverage to within the company's targeted range. As highlighted in today's release, we achieved a number of significant financial and operating records in the third quarter, including consolidated total revenues increased 16% to $1.81 billion, consolidated adjusted gross profit increased 8% to $488 million, adjusted EBITDA increased 9% to $533 million, and adjusted earnings per diluted share from continuing operations increased 10% to $4.69. These results on flat organic aggregate shipments underscore the success of our value over volume commercial strategy through which multiple pricing actions were successfully implemented this year. However, inflationary trends also impacted our operating costs and affected our adjusted consolidated gross margin, which declined 200 basis points to 26.9% for the quarter. Notably, this is both a moderated pace and sequentially higher as compared with the second quarter of 2022. As a result of the current demand environment and persistently high inflation, we've advised customers of a fourth quarter price increase in a number of our markets, as well as broad-based January 1st, 2023 increases. We believe these commercial initiatives, together with other inflation containment actions, position Martin Marietta well to expand margins in the fourth quarter, and deliver another year of strong profitability in 2023. For our company, it passed its prologue, and we believe that it is. Inflation supports a constructive pricing environment for upstream materials, the benefits of which endure long after inflationary pressures abate. Let's now turn to our third quarter operating performance, starting with aggregates. we continue to experience healthy aggregates demand across the company with total aggregate shipments inclusive of acquisitions, increasing 5.6% to a quarterly record of 60.2 million tons. Organic aggregate shipments were largely flat as otherwise strong demand was offset by supply chain disruptions, inclement weather in certain key markets, and most notably, logistics constraints and cement shortages the latter curbing the immediate need for aggregates in the manufacture of ready-mix concrete. Aggregates pricing fundamentals remain very attractive, and organic aggregates pricing increased 11.9% or 11.3% on a mixed adjusted basis. The cumulative effect of multiple pricing actions continued to build in the third quarter. These disciplined actions combined with overall customer confidence and demand visibility bode well for meaningful price acceleration in the fourth quarter and in 2023. The Texas cement market continues to experience robust demand and tight supply, resulting in effectively sold-out conditions. Against that backdrop, and combined with our cement team's focused execution on commercial and operational excellence, we delivered record third-quarter shipments of 1.1 million tons and pricing growth of 21.4%, as our second $12 per ton increase this year went into effect on July 1st. We expect favorable Texas cement commercial dynamics will continue for the foreseeable future, supportive of our recently announced $20 per ton price increase effective January 1st, 2023. Shifting to our targeted downstream businesses, organic ready-mix concrete shipments decreased 16.8% largely due to a historically wet August in North Texas, as well as the completion of certain large projects in the quarter. Organic pricing increased 20.3%, reflecting multiple pricing actions, including fuel surcharges necessary to pass through raw material and other inflationary cost pressures. Organic asphalt shipments increased 4.3%, driven primarily by strong demand in Colorado, while organic pricing improved 22% to help offset the increase in raw materials costs, principally liquid asphalt or bitumen. Notably, for comparative purposes, prior year asphalt volumes were constrained by a bitumen shortage in Colorado. Including contributions from our acquired operations in California and Arizona, asphalt shipments and pricing increased 31.3% and 26.1% respectively. Before discussing our preliminary 2023 outlook, I'll turn the call over to Jim to conclude our third quarter discussion with a review of our financial results. Jim?