Martin Marietta Materials, Inc. (NYSE:MLM) Q1 2018 Earnings Conference Call - Final Transcript

May 08, 2018 • 10:00 am ET


Martin Marietta Materials, Inc. (NYSE:MLM) Q1 2018 Earnings Conference Call - Final Transcript


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C. Howard Nye

exceeds world-class benchmarks.

With acceleration of construction activity through the balance of the year, together with favorable underlying demand trends, safe and efficient operations and continued price discipline, we remain on target to achieve our original 2018 guidance and, as announced in today's release, we're increasing that guidance to reflect the expected contribution from the Bluegrass acquisition.

On April 27th, we welcomed more than 400 talented employees to the Martin Marietta team, as we successfully completed the acquisition of Bluegrass, the largest privately-held pure-play aggregates business in the United States. With more than 2 billion tons of high-quality reserves, the acquired operations expand our product offerings and importantly, strengthened our aggregates-led positions in high-growth regions of the Southeast and Mid-Atlantic, principally in Georgia and Maryland.

In these two states, aggregates shipments remain 20% to 30% below mid-cycle demand, not peak demand, but 20% to 30% below mid-cycle levels. As economic growth in the Eastern United States accelerates, we believe our enhanced geographic footprint positions us to meaningfully benefit from anticipated increased aggregates demand from construction activity.

I'm grateful to our collective employees for their dedication and perseverance in reaching this point and their efforts to complete this acquisition, the second largest in our company's history. We look forward to working together to seamlessly integrate the Bluegrass operations and realize synergies to deliver significant value to our shareholders, customers and employees. Thus far, integration activities have progressed superbly both from an operational and customer-facing perspective. We expect this trend to continue.

Additionally, we appreciate the efforts of the US Department of Justice as it reviewed the Bluegrass transaction. We view the agreement reached with the DoJ as a fair, responsible and appropriate conclusion to the Hart-Scott-Rodino process. More specifically, the agreement requires that we divest the leasehold interest and related assets of our Forsyth County quarry, north of Atlanta, Georgia, we have already seen the transaction. Additionally, we are required to divest Bluegrass's Beaver Creek quarry in Western Maryland.

Our aim is to complete this sale in the second quarter. Such divestitures were anticipated and do not impact the strategic rationale for, or the value of, the Bluegrass transaction, which is expected to be accretive to earnings per diluted share and cash flow within 12 months.

Now let us turn to the company's first quarter performance. In line with our first quarter business plan and normal seasonality, aggregates shipments decreased 8% overall, with all segments reporting declines from widespread precipitation and cold temperatures across our geographic footprint.

That said, according to the National Oceanic and Atmospheric Administration, or NOAA, the Dallas-Fort Worth area, our single largest metropolitan market, eclipsed these more typical weather conditions, and in fact, experienced the wettest February on record with 10.5 inches of rainfall, or 8 inches above the normal level. This was punctuated by measurable snow accumulation that occurred in Houston and San Antonio, as well as in North Carolina.

For example, our Mid-Atlantic Division, which historically has generated the company's highest margins, experienced three additional