Day: October 29, 2020

ARNC – Arconic to Host Webcast and Announce Third Quarter 2020 Results

PITTSBURGH–(BUSINESS WIRE)–Arconic Corp. (NYSE: ARNC) (“Arconic” or “the Company”) will hold a webcast and teleconference to discuss third quarter 2020 financial results on Thursday, November 5, 2020 at 10 a.m. Eastern Time. The Company will issue its press release announcing financial results for the third quarter ended September 30, 2020, prior to the opening of the market on November 5, 2020.

Interested parties are asked to dial-in at least 10 minutes before the call begins. Details of the webcast and teleconference follow.

Conference Call Information:


November 5, 2020


10:00 a.m. ET


(833) 614-1535


+1(520) 809-9937 (International)


Conference ID: 3683624

Webcast: Available on the Investor Relations “Events and Presentations” section of (audio and slides).

Replay and Transcript Information: A replay of the conference call will be available for one year and a transcript will be posted on the Investor Relations “Events and Presentations” section of

About Arconic
Arconic Corporation (NYSE: ARNC), headquartered in Pittsburgh, Pennsylvania, is a leading provider of aluminum sheet, plate and extrusions, as well as innovative architectural products, that advance the ground transportation, aerospace, industrial, packaging and building and construction markets.

AVIR – Atea Pharmaceuticals Announces Pricing of Initial Public Offering

BOSTON, Oct. 29, 2020 (GLOBE NEWSWIRE) — Atea Pharmaceuticals, Inc. (Nasdaq: AVIR) (“Atea”), a clinical-stage biopharmaceutical company focused on discovering, developing and commercializing antiviral therapeutics to improve the lives of patients suffering from life-threatening viral infections, today announced the pricing of its initial public offering of 12,500,000 shares of its common stock at a price to the public of $24.00 per share. All of the shares of common stock are being offered by Atea. The gross proceeds from the offering, before deducting underwriting discounts and commissions and estimated offering expenses payable by Atea, are expected to be $300 million, excluding any exercise of the underwriters’ option to purchase additional shares. Atea’s common stock is expected to begin trading on the Nasdaq Global Select Market under the ticker symbol “AVIR” on October 30, 2020. The offering is expected to close on November 3, 2020, subject to satisfaction of customary closing conditions. In addition, Atea has granted the underwriters a 30-day option to purchase up to an additional 1,875,000 shares of Atea’s common stock at the initial public offering price less the underwriting discounts and commissions.
J.P. Morgan Securities LLC, Morgan Stanley & Co. LLC, Evercore Group L.L.C. and William Blair & Company, L.L.C. are acting as joint book-running managers of the offering.A registration statement on Form S-1 (File No. 333-249404) relating to the offering has been filed with the Securities and Exchange Commission and became effective on October 29, 2020. The offering was made only by means of a prospectus. Copies of the final prospectus relating to the offering may be obtained from: J.P. Morgan Securities LLC, c/o Broadridge Financial Solutions, 1155 Long Island Avenue, Edgewood, NY 11717, telephone: 866-803-9204; Morgan Stanley & Co. LLC, 180 Varick Street, 2nd Floor, New York, NY 10014, Attention: Prospectus Department, or by email at; Evercore Group, L.L.C., Attention: Equity Capital Markets, 55 East 52nd Street, 35th Floor, New York, NY 10055, by telephone at (888) 474-0200, or by email at; or William Blair & Company, L.L.C., Attention: Prospectus Department, 150 North Riverside Plaza, Chicago, IL 60606, by telephone at (800) 621-0687 or by email at press release does not constitute an offer to sell or the solicitation of an offer to buy these securities, nor shall there be any sale of these securities in any state or jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state or jurisdiction.ContactsInvestors:
Will O’Connor
Stern Investor Relations
Carol Guaccero

C – Citi's Naveed Sultan To Lead Bank's Global Digitization Charge

Veteran Citi executive Naveed Sultan will lead the financial giant’s efforts to advise governments and other clients on digitization in a new role as chairman of its Institutional Clients Group, the bank announced in an internal memo on Thursday (Oct. 29).

Sultan will be in charge of building a new “digital policy, strategy and advisory practice” that will consult with governments interested in digitizing their economies and financial systems, among other duties, the memo states.

The growing global digital economy is an area in which Sultan is well-versed, having “led several pioneering initiatives, including Digital Money Index and the Centre for Global Finance and Technology with Imperial College,” Citi ICG Chief Executive Officer Paco Ybarra said in the memo.

Sultan has served for the last nine years as global head of Citi’s Treasury and Trade Solutions, or TTS, which he will continue to run until a replacement is found.

In explaining Sultan’s new role as the bank’s top executive in advising foreign governments and other clients on digitization, Ybarra said it is “critical” that Citi “develops a strategic, coherent and holistic approach” in the emerging sector.

Sultan’s job will be to “advise our clients and other constituencies, including policymakers, and provide them [with] actionable insights to respond to this phenomenon,” Ybarra wrote.

“This new practice will advise governments to develop policies to digitize their economies, including their financial systems,” Ybarra stated. “It will also provide guidance and thought leadership to corporates and financial institutions to transform their businesses and operating models to stay relevant in an increasingly digital world.”

Sultan also won praise for his work overseeing Citi’s Treasury and Trade Solutions, with TTS, under Sultan’s “stewardship,” having “grown into a world-class franchise as recognized by our clients, investors and financial services industry for its innovation, sustained financial performance and thought leadership,” according to Ybarra.

In his new post at Citi’s ICG, Sultan also takes a leading role in helping the bank in its “senior interactions with sovereigns,” with a focus on emerging markets as the bank looks to strengthen relationships and “create commercial opportunities,” the memo states.



New forms of alternative credit and point-of-sale (POS) lending options like ‘buy now, pay later’ (BNPL) leverage the growing influence of payments choice on customer loyalty. Nearly 60 percent of consumers say such digital options now influence where and how they shop—especially touchless payments and robust, well-crafted ecommerce checkouts—so, merchants have a clear mandate: understand what has changed and adjust accordingly. Join PYMNTS CEO Karen Webster together with PayPal’s Greg Lisiewski, BigCommerce’s Mark Rosales, and Adore Me’s Camille Kress as they spotlight key findings from the new PYMNTS-PayPal study, “How We Shop” and map out faster, better pathways to a stronger recovery.

CNSL – Consolidated Communications Holdings, Inc. (CNSL) CEO Bob Udell on Q3 2020 Results – Earnings Call Transcript

Consolidated Communications Holdings, Inc. (NASDAQ:CNSL) Q3 2020 Earnings Conference Call October 29, 2020 10:00 AM ET

Company Participants

Jennifer Spaude – Investor Relations

Bob Udell – President and Chief Executive Officer

Steve Childers – Chief Financial Officer

Conference Call Participants

Greg Williams – Cowen

Eric Luebchow – Wells Fargo


Ladies and gentlemen, thank you for standing by, and welcome to the Consolidated Communications Holdings, Inc Third Quarter 2020 Results Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today’s conference is being recorded. [Operator Instructions]

I would now like to hand the conference over to your speaker today, Jennifer Spaude. Please go ahead, ma’am.

Jennifer Spaude

Thank you, and good morning. I would like to welcome everyone to Consolidated Communications’ third quarter 2020 earnings call. On the call today are Bob Udell, our President and Chief Executive Officer; and Steve Childers, our Chief Financial Officer. Following our prepared remarks, we will open the call up for questions.

Before we proceed, I will remind you our earnings release, financial statements and presentation are all posted on the Investor Relations section of our website, which can be found at

Please review the safe harbor provisions on Slide 2 of our presentation. Today’s discussion includes statements about expected future events and financial results that are forward-looking and subject to certain risks and uncertainties. A discussion of factors that may affect future results is contained in consolidated filings with the SEC.

Today’s discussion will also include certain non-GAAP financial measures. Our earnings release includes reconciliations of these measures to the nearest GAAP equivalent.

I will now turn the call over to Bob Udell.

Bob Udell

Thank you, Jennifer, and good morning, everyone. I hope you’re all doing well and staying safe. Wow, we’ve got great things to talk about today. I’m going to kick it off with an overview of our strong Q3 results and our new strategic partnership with Searchlight. Steve will provide an update on the financial results and an overview on the new capital structure. I’ll close with a discussion on our strategic imperatives and fiberbuild plans that will enable us to return to growth and future-proof our business.

I’m very pleased that our third quarter results demonstrate both the resiliency of our business and the very strong execution in improving revenue trends, growing adjusted EBITDA and strengthening the balance sheet. In addition to our very strong third quarter results, we recently completed a recapitalization, which included both a strategic investment and a global refinancing in which we raised $2.25 billion in new secured debt. This new capital structure and capital infusion will significantly bolster our growth plans, which I’ll discuss later.

First, let me remind you that we set out on a path 1.5 years ago to transform the business when we announced a deliberate capital allocation plan, and that’s exactly what we’ve done. I fully expect Consolidated Communications’ transformation to continue and will look very different in another 18 months from today. We now have the foundation to do this with a strong balance sheet, increased capital and liquidity.

Before jumping into quarterly results, let me provide an update on how the pandemic is impacting our business. In this new normal, our communication services remain critical and play a fundamental role in keeping consumer, commercial and carrier customers connected. We turn technology into solutions, connecting people wherever they work and live. People are depending on connectivity now more than ever. And we are working harder than ever to ensure reliable and continuous high-quality services for them.

As we look back on the past six months, COVID has certainly changed how we operate, but we’re determined to ensure resilience in our business, and we are fortunate to have a team that has adjusted quickly and continues to adapt as needed. Our network architecture continues to successfully handle the increased traffic and usage. The proactive measures we immediately implemented have kept our employees and customers safe.

At this time, we have not experienced any material impacts to our business as a result of the pandemic.

Now turning to third quarter results. I’m very pleased with the solid and stable results we delivered in the recent quarter and year-to-date. Revenue growth trends in both broadband and data transport services combined with lower operating expenses contributed to our overall results.

Starting with commercial and carrier, we grew data and transport 1.6%, which further demonstrates our consistent track record of growing this strategic revenue stream. Our carrier channel is active with 5G fiber and new wireless backhaul prospects. Our sales team is doing an excellent job of maintaining strong relationships and collaborating closely with carriers to identify upgrade opportunities.

Our tower connections under contract increased roughly 2% year-over-year, totaling approximately 3,900 connections. As we build out carrier-grade capacity, our fiber network investments allowed us to increase on net buildings 12.5% from a year ago, totaling approximately 13,200. The vast majority of our new sales across all customer groups are on net, which correlates to higher margins, increased opportunity to upsell and a greater ability to ensure the best customer experience, ultimately contributing to customer retention.

Within our commercial channel, we continue to see demand for bandwidth upgrades and our ProConnect VOIP revenue is up 12% year-over-year. We recently launched Enterprise at Home, which is a direct response to business customer needs right now. This new service provides business class internet and full-featured unified communications to remote employees, removing obstacles to productivity and providing priority of service and support for our commercial clients when working from residential locations.

In addition, we launched Webex Contact Center and expanded our Microsoft Productivity Suite to all markets. Our commercial sales team’s CCI Ignite sales approach fits the market and environment using a hybrid of virtual tools to meet customers where it makes sense for them.

Now turning to the consumer channel. We grew broadband revenue 2.6%, representing the sixth consecutive quarter of broadband revenue growth. Our broadband services are competitive, and we are even more excited about our fiber expansion, which will accelerate this growth in 2021. CCiTV, our streaming video service, is fully launched in Northern New England, Texas and most recently in California and Illinois. We continue to see the majority of subscribers bringing their own device and higher broadband speed adoption with CCiTV.

This easy selfinstalled product reduces the capital intensity compared to traditional video. We have nine public private partnership fiber builds in process most in New Hampshire totaling approximately 10,000 homes passed when complete. Our fiber density positions us well to partner with communities through public-private agreements and Federal CARE’s funding. This gives us additional opportunities in rural areas that would otherwise be difficult to justify financially.

These nine public-private community builds are all slated for completion in late 2020 or early 2021. Our consumer channel has been stable and we’re eager to accelerate our fiber growth plans to build a best-in-class consumer service experience. We executed well across all of our three customer channels, and our teams are laser-focused on the right priorities.

I will now turn the call over to Steve, who will provide more details on our financial results for third quarter. Steve?

Steve Childers

Good morning, everyone. As Bob said, it was an exciting and a simple quarter, and I’m happy to share with you the details of our strong third quarter results as well as to provide an overview of our new capital structure. Our financial summary for the third quarter begins on Slide 4 of our presentation.

Operating revenue for the third quarter totaled $327.1 million, a decline of 1.9%, which is more than a 2x improvement compared to the 4.2% decline a year ago. This is the result of the continued strong performance realized across all of our customer channels. As a result of improved revenue trends and continued cost structure improvement, third quarter adjusted EBITDA was up 1% or $1.3 million from a year ago, totaling $132.2 million for the quarter.

Now let’s review revenue starting with commercial and carrier, where revenue totaled $146.4 million in the third quarter. Before moving into each component of commercial and carrier revenue, I want to note that, as discussed on prior earnings calls, due to the potential impact of COVID, our SMB or small business, revenues are approximately 8% of total revenue. As of today, we have not seen a material change in our SMB revenue trends.

Data and transport revenue grew 1.6% and totaled $90.2 million. This growth continues to be fueled by our investment in our fiber network and the addition of new business products enhancements.

Commercial voice revenue declined $1.3 million or 2.7%, which was reduced by more than 1/2 from a year ago. Other revenue declined approximately $900,000 in the recent quarter and is down $7.4 million in the nine-month period, primarily due to lower equipment sales. Equipment sales is the one area we are seeing a slowdown due to the COVID-19 economy, and we expect decisions on equipment purchases to continue to be deferred as customers stay cautious to current economic conditions. The impact on earnings and cash flow with this low margin product will be nominal.

Now turning to our consumer channel, where revenue totaled $128.4 million. Total consumer revenue was down 2.3% or $3 million in the third quarter. However, the recent quarter decline rate improved 140 basis points from a year ago, and the channel showed overall growth sequentially for the second quarter in a row.

Consumer broadband revenue grew for the sixth consecutive quarter and was up 2.6% or $1.7 million for the third quarter. Consumer ARPU increased 4.6% year-over-year, now totaling $76. Our strategy of leading with broadband, specifically in our newly upgraded areas, is working and driving retention as well as higher ARPU.

Consumer voice revenue was down approximately 6% or $2.7 million year-over-year. The decline in consumer voice was reduced almost in half from a year ago. We attribute this to a more robust and competitive broadband offering, which contributes to higher voice retention.

Video revenue declined 9.8%. The $2 million decline was offset by reductions in video programming expense and lower CapEx. In part, this decline reflects our change in strategy to streaming over-the-top services bundled with broadband services.

Network access revenues declined $2.2 million, largely due to special access declines and subsidy revenue was flat and it is expected to remain at an $18 million per quarter run rate. With respect to the Rural Digital Opportunity Fund, we will be participating in the RDOF auction, which starts today. We will continue to evaluate our options throughout the bidding process but due to strict FCC anti-collusion rules, we cannot comment further at this time.

Now turning to operating expenses, excluding depreciation and amortization, other operating expenses totaled $209.5 million, an improvement of $7.2 million or 3.3% from the prior year. Free cash flow increased $39.6 million year-over-year and is up $128.9 million year-to-date.

Cost of services and products declined $2.2 million, driven by lower video programming expense and lower salaries and benefits associated with ongoing cost savings initiatives. SG&A costs were reduced by $5 million in the recent quarter, primarily due to lower labor and benefits expense combined with operational efficiencies.

Net interest expense in the quarter was $31.7 million, down $2.6 million from the same period last year. The decrease was primarily due to declines in variable interest rates on the term loan and repurchases in the company’s 6.5% senior notes in prior periods.

Cash distributions from company’s wireless partnerships totaled $12.4 million in the third quarter compared to $10.9 million a year ago. Year-to-date, we have received $32 million in wireless cash distributions. And at the beginning of the year, we expect it to be in the range of $37 million to $39 million for the full year of 2020. At this time, we have limited visibility to Q4 distributions from Verizon wireless.

Adjusted net income per share was $0.23 compared to $0.06 per share a year ago. The improvement reflects the consistency of our operating results and a decline in depreciation expense. CapEx was approximately $56 million in the third quarter and $152 million year-to-date. Our CapEx spend supported success-based fiber projects and broadband network infrastructure expansion.

As we pivot to execute on our growth plans in the fourth quarter, we expect full year CapEx to be at least $210 million as we prepare for a fast start in 2021 on our fiber expansion and build plans. Total liquidity, including cash on hand and availability under our revolver was approximately $191.6 million.

Our business is strong and stable, and we have demonstrated our ability to improve revenue trends and manage costs, and we have made notable progress on our capital allocation plan. Our leverage ratio improved from 4.33 times at the beginning of the year and we actually achieved our year-end target of 4 times at the end of the third quarter. Pro forma for the October 2nd recapitalization, which allowed us to reduce debt by approximately $200 million, our net debt leverage would have been 3.5 times.

We closed the recapitalization on October 2, and we now have an even stronger balance sheet, enhanced flexibility, increased liquidity and extended maturities. We are very pleased with the strong support from lenders and bond investors on our refinancing. The debt structure consists of the following a 5-year $250 million revolving credit facility, which has been upsized to respond to the letter of credit requirements for RDOF, a 7-year $1.2 billion secured term loan priced at LIBOR or plus a coupon of 4.75% with a 1% floor, and senior secured notes of $750 million at a coupon rate of 6.5% due in 2028.

This successful refinancing, combined with the strategic investment, provides us with much greater financial flexibility to support our fiber expansion growth plans. We will not be reinstating guidance for the fourth quarter or full year 2020. However, in the fourth quarter, we will offer the following color. Uncertainty around the threat from COVID-19 persist, we continue to navigate the pandemic-led economic crisis with nominal effect on our overall results.

However, we are closely monitoring all aspects of our business, and we are very focused on the safety of our employees and customers. We expect to see normal levels of seasonality within our Northern New England residential markets as snow birds migrate for warmer weather. Last year, we estimated the fourth quarter impact to revenue, primarily in data and voice, net of a price increase in the fourth quarter to be about $2.5 million.

Since we announced the September 14 announcement of the partnership with Searchlight, we have been accelerating our fiber and growth expansion plans, and we will use the fourth quarter to get off to a fast start and build plans for 2021. We could have some start-up operating expense for the new fiber builds in addition to the CapEx being at least $210 million for the full year, as I mentioned earlier. We have outlined our new capital structure. And with respect to the Searchlight investment, we will be electing to pick interest for the fourth quarter of 2020 and throughout 2021.

With that, I’ll now turn the call back over to Bob to discuss strategic priorities. Bob?

Bob Udell

Thanks, Steve. The consistency of our results, the strength and depth of our team and the quality of our assets helped us attract the strategic partnership with Searchlight. We are gaining an experienced partner who brings valuable research and development capabilities and knowledge of the industry in addition to their investment. We are pleased to have recently welcomed Dave Fuller to our Board as one of their designated board members.

Searchlight’s capital infusion enabled our global refinancing and allows us to pivot to accelerate our growth and ramp our fiber expansion plans beginning next year. We are embarking on a multiyear investment initiative where we will upgrade more than 1 million passings, addressable homes with fiber, enabling us to provide superior service across all three customer channels and deliver revenue growth. While we’ve been successful in growing broadband, we are now positioned to immediately bolster our fiber expansion plans and become an even more competitive provider.

We are focused on finishing the year strong, and we are already deep into the planning and execution on our accelerated fiber builds. We have experienced fiber construction teams and have firmed up our plans, which include upgrading 250,000 homes to gig speeds in 2021. We will significantly improve our infrastructure, and our digital transformation project will create a best-in-class customer experience as we become a dominant fiber-based broadband provider. The accelerated build plans leverage our near net fiber network to significantly boost customer speeds and expand gigabit fiber services to more than 50% of our addressable market.

As we enter the next phase of our growth and transformation, we’ve sharpened our focus on strategic imperatives, which are outlined on Slide 11 in our investor deck. First, we’re significantly accelerating our growth plan with the strategic investment and partnership with Searchlight. Our fiber expansion will allow us to return to top line growth, and this return to growth is very exciting for this team.

Next, we’ll leverage our fiber assets and expansion across the three customer channels as we have in our past and as we work to deliver best-in-class customer experience and the most competitive services. Third, our new capitalization has extended maturities and increased liquidity to position consolidated for accelerated growth, providing enough runway to complete our fiber build plan.

We’ll target substantially all free cash flow to focus on highest return fiber expansion projects. And we’ll continue to evaluate the assets in our portfolio as a normal course of business to ensure all assets have a long-term strategic fit.

In closing, I want to reiterate what an important time this is for our company and how excited we are to be executing on our fiber expansion plans. We have a strong, stable business, an experienced management team and a significantly improved financial position. I couldn’t be more excited for what the future holds.

With that, operator, we’ll be guided to take questions.

Question-and-Answer Session


[Operator Instructions] Our first question comes from Greg Williams with Cowen. You may proceed with your question.

Greg Williams

Nice quarter. A couple of questions. One on the Verizon cash distribution, I know you just said you don’t have the visibility, but it was $12 million, and it looks like it’s trending ahead. But could I take your comments to maybe suggest that the $37 million to $39 million that you typically guide is it still the right way of looking at it that is anticipating heavy iPhone promotions in the fourth quarter as we’ve seen in the past?

The second question is, just on the EBITDA full year, you said you did not reinstate EBITDA guidance, but it seems like you’re trending in a place where you should be getting at least at the high end, if not north of that, but you did mention some heavy start-up costs for the acceleration of your fiber deployment. So can you maybe unpack or provide some more color to such start-up costs in the fourth quarter and how we should think about the margin trajectory?

And the last one is just on the fiber acceleration. Can you just help us with a fiber build cadence? Where are you now in engineering or in planning? When do you plan on ramping up? How many homes passed in 2021 will be more front-end loaded or will the build be more linear? And maybe would you be providing some milestones or measures of success with the fiber build?

Bob Udell

Yes. Greg, that’s a load of question, so let me unpack that. And I’ll start with the last one first, on the fiber build cadence. And Steve will pick up on probably the Verizon cash distros and he’ll have comments on EBITDA, I’m sure. But let me start with, as I said in the prepared remarks, we’re looking at 250,000 passings added in 2021, and I would expect the cadence to be similar to that. And I really think that, that’s a minimum.

What we always find, and we found this in past builds like the state of New York we did, we find more passings just by nature of our conservative approach to engineering to each location, each address that we’re targeting. We find that there’s economies when we’re in the market, and we usually get a little bit of overachievement.

So I think 250,000 is a minimum, upgraded to 1 gig or fiber passings that we’ll see in 2021. What we’re doing right now to get a jump on that is taking the CARES Act teams, I mean, just to give you an example, we’ll build 500 miles of fiber in roughly 120 days, and we’re about two-thirds of the wait on with it for those public-private partnerships that we mentioned earlier because they’re in very rural places.

So we’ve already got the infrastructure rolling, but what we’re doing is bolstering those teams, making sure that we can have a pretty strong cadence of construction coming out of the harshest winter time in Northern New England, in particular, and we have no risk of not having that market available, that 250,000 passings, by the end of 2021. I think the net adds will be somewhat back-end loaded in 2021, just by nature of getting the digital transformation, some upgrades we’re doing on the user interface for customers to order service electronically through a digital experience.

We’re significantly simplifying that in this effort and really changing the customer experience from top to bottom so that we can benefit from all the reliability and flexibility of fiber product can give us all the way to the end user. So that kind of covers the cadence and the build planning. And yes, we’ll have metrics that we, Steve and I are still working through with the team, the will metrics that we share, the track the addressable homes available and then how we’re doing in that adds across those upgraded areas. So more to come on that. Steve, do you want to pick up on Verizon?

Steve Childers

Yes. So Greg, thanks for the question. So going back to the Verizon cash distributions. Yes, so we did receive over $12 million in Q3. And I think the point I was trying to make is we are not expecting to receive that same level for Q4. I think we will be above the $37 million to $39 million range unless we have a surprise from Verizon. Again, at this point in time, we have limited visibility to that number, but I would expect us to be past or above the $39 million for the full year.

And then if you go to think about the EBITDA number, not giving the guidance. I think not giving guidance is more because of uncertainty relative to COVID and probably more on the CapEx side on how much we might spend just to get ready. Right now, we’re not really seeing a material impact for operating expenses relative to getting ready for the fiber builds, but if we have the opportunity to accelerate that to position us to get off to a fast start in ’21, we will do so.

So I think the biggest thing I would take away from the Q4 numbers are the impact of seasonality in the Northern New England markets, and there could be some startup expense relative to the fiber builds. But again, I think that’s why we didn’t give guidance, but not necessarily looking for that to be a hugely material number at this time. But again, we are motivated to get off the next start of ’21.


Our next question comes from Eric Luebchow with Wells Fargo. You may proceed with your question.

Eric Luebchow

I’m wondering the component of your broadband growth, as you look out, you’ve had some nice performance in that market. So with your ARPUs at 76, do you think you can continue to grow that as customers upgrade speed tiers or you take pricing actions or do you think more of the future growth is going to come from customer adds?

Bob Udell

Yes. I think, Eric, that it’s both. We have had a history using the legacy consolidated markets as an example of matching speed tier increases with people coming off of promotions. And as a result, always been able to increment up a couple dollar ARPU improvement. So that’s been a natural trend for us.

I think that there’s going to be a boost that comes from the net adds as a result of the fiber addressable market being increased, especially Northern New England, where we have the lowest share. And so I think it’s really going to be both. And it’s probably a little bit too early for me to give you what the split might be on that, but generally speaking, I would say, we’re going to be aggressive in pricing the initial launch of the fiber product and to make sure we’ve got a very good competitive position. So I think overall, we should see ARPU stable, if not growing, because there’s room for ARPU increase in the markets where we’re going to launch the 1 gig product.

Eric Luebchow

Great. That’s helpful. And a follow-up on the Northern New England build. I guess, what type of penetration rates are you assuming from the total homes passed that what do you think is achievable? And maybe you could remind us what the competitive environment looks like in that region and kind of what gives you confidence you can take share from some of the incumbents?

Bob Udell

Yes. I think the way to think about it is, we’re starting there with roughly 9%, 10% share and a network architecture that’s very near net the customers, but hasn’t been exploited for the consumer base. And so we’re maybe a bit behind in some of the downtown areas and have done a very good job in the more rural areas of Northern New England.

So essentially, we’re going to develop it into a duopoly environment, and we think that what you’d see in typical duopoly type situations across other markets is what’s possible. There’s reports of 30%, 40%, and our business plan works at something in the lower range of that. So we feel really good about our potential, especially when you consider the product is going to be a symmetrical 1 gig or 2 gig even out of the gate.

So with the technology we have available to us and dedicated bandwidth from the host or the node location, all the way out to the customer on a court basis, we think our architecture puts us in an excellent position to have duopoly penetrations within three or four years as these fiber build areas mature.


[Operator Instructions] And I’m not showing any further questions at this time. I would now like to turn the call back over to Bob Udell for any further remarks.

Bob Udell

Thank you. Well, thank you all for joining the call today. We surely appreciate your support in Consolidated Communications and look forward to reporting next quarter on our year-end results and the progress on our growth plans. Thank you, and have a great day.


Thank you, ladies and gentlemen. This concludes today’s conference call. Thank you for participating. You may now disconnect.

ZSAN – ZSAN CLASS ACTION NOTICE: Glancy Prongay & Murray LLP Files Securities Fraud Lawsuit Against Zosano Pharma Corporation

LOS ANGELES–(BUSINESS WIRE)–Glancy Prongay & Murray LLP (“GPM”) announces that it has filed a class action lawsuit in the United States District Court for the Northern District of California captioned Carr v. Zosano Pharma Corporation, et al., (Case No. 3:20-cv-07625) on behalf of persons and entities that purchased or otherwise acquired Zosano Pharma Corporation (“Zosano” or the “Company”)(NASDAQ: ZSAN) securities between February 13, 2017 and September 30, 2020, inclusive (the “Class Period”). Plaintiff pursues claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”).

Investors are hereby notified that they have until 60 days from this notice to move the Court to serve as lead plaintiff in this action.

If you suffered a loss on your Zosano investments or would like to inquire about potentially pursuing claims to recover your loss under the federal securities laws, you can submit your contact information at You can also contact Charles H. Linehan, of GPM at 310-201-9150, Toll-Free at 888-773-9224, or via email at to learn more about your rights.

Zosano is a clinical stage pharmaceutical company. Its lead product candidate is Qtrypta (M207), a formulation of zolmitriptan coated onto the Company’s microneedle patch. Its pivotal efficacy trial, called ZOTRIP, began in July 2016. In December 2019, Zosano submitted its New Drug Application (“NDA”) to the U.S. Food and Drug Administration (“FDA”) seeking regulatory approval for Qtrypta.

On September 30, 2020, after the market closed, Zosano disclosed receipt of a discipline review letter (“DRL”) from the FDA regarding its NDA for Qtrypta and stated that approval was not likely. According to the Company’s press release, the FDA “raised questions regarding unexpected high plasma concentrations of zolmitriptan observed in five study subjects from two pharmacokinetic studies and how the data from these subjects affect the overall clinical pharmacology section of the application.” The FDA also “raised questions regarding differences in zolmitriptan exposures observed between subjects receiving different lots of Qtrypta in the company’s clinical trials.”

On this news, the Company’s share price fell $0.92, or 57%, to close at $0.70 per share on October 1, 2020, on unusually heavy trading volume.

On October 21, 2020, Zosano disclosed receipt of a Complete Response Letter (“CRL”) from the FDA. As a result of the previously identified deficiencies, the FDA recommended that Zosano conduct a repeat bioequivalence study between three of the lots used during development.

On this news, the Company’s share price fell $0.17, or 27%, to close at $0.04440 per share on October 21, 2020, on unusually heavy trading volume.

The complaint filed in this class action alleges that throughout the Class Period, Defendants made materially false and/or misleading statements, as well as failed to disclose material adverse facts about the Company’s business, operations, and prospects. Specifically, Defendants failed to disclose to investors: (1) that the Company’s clinical results reflected differences in zolmitriptan exposures observed between subjects receiving different lots; (2) that pharmocokinetic studies submitted in connection with the Company’s NDA included patients exhibiting unexpected high plasma concentrations of zolmitriptan; (3) that, as a result of the foregoing differences among patient results, the FDA was reasonably likely to require further studies to support regulatory approval of Qtrypta; (4) that, as a result, regulatory approval of Qtrypta was reasonably likely to be delayed; and (5) as a result of the foregoing, Defendants’ public statements were materially false and misleading at all relevant times.

If you purchased or otherwise acquired the Zosano securities during the Class Period, you may move the Court no later than 60 days from this notice to ask the Court to appoint you as lead plaintiff. To be a member of the Class you need not take any action at this time; you may retain counsel of your choice or take no action and remain an absent member of the Class. If you wish to learn more about this action, or if you have any questions concerning this announcement or your rights or interests with respect to these matters, please contact Charles Linehan, Esquire, of GPM, 1925 Century Park East, Suite 2100, Los Angeles California 90067 at 310-201-9150, Toll-Free at 888-773-9224, by email to, or visit our website at If you inquire by email please include your mailing address, telephone number and number of shares purchased.  

Follow us for updates on LinkedIn, Twitter, or Facebook.

This press release may be considered Attorney Advertising in some jurisdictions under the applicable law and ethical rules.

DAL – Delta and pilot union reach preliminary deal to avoid furloughs until 2022

A pilot talks on a mobile device near a Delta Air Lines gate at the Salt Lake City International Airport.
George Frey | Bloomberg | Getty Images

Delta Air Lines and the union that represents its pilots have reached a preliminary cost-cutting agreement that would avoid furloughs until Jan. 1, 2022, the union said Thursday.

The agreement still needs approval from Delta’s early 13,000 pilots. The agreement would reduce monthly minimum guaranteed hours by 5%. The company had planned to furlough up to 1,941 pilots. Airline employees who are furloughed generally retain rights to be recalled by the company, but given the industry’s downturn in the pandemic, it’s not clear when that could be.

American Airlines and United Airlines earlier this month started furloughing more than 30,000 employees. Carriers were prohibited from cutting jobs until Oct. 1 under the terms of $25 billion in federal aid for the sector.

The Atlanta-based carrier has said its other frontline workers like flight attendants escaped furloughs thanks to some 18,000 employees, roughly a fifth of its pre-pandemic staff, who opted to take buyouts, while thousands of others took unpaid leave. Delta had postponed planned furloughs until Nov. 1 as negotiations continued with pilots.

Delta didn’t immediately return a request for comment.

AMZN – Amazon expects $4 billion in COVID-related expenses this quarter — but its CFO says it's mostly coming from indirect costs like 'productivity drags' (AMZN)

Amazon warehouse staffAmazon warehouse staff

Ina Fassbender/AFP via Getty Images

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  • Amazon said on Thursday that it expects to record about $4 billion in COVID-related costs this quarter.
  • Amazon CFO Brian Olsavsky said the $4 billion figure includes indirect costs like loss in productivity as well as more direct ones like buying protective gear for its employees.
  • Wall Street appears to have been spooked by the $4 billion estimated cost, as Amazon shares dropped 1% in after-hours even though it reported stellar third-quarter results.
  • Visit Business Insider’s homepage for more stories.

Amazon said on Thursday that it expects another $4 billion in COVID-related expenses this quarter.

That’s on top of the $7.5 billion it’s already recorded as COVID-related costs this year, like buying face masks for its employees and building an in-house testing lab. 

But Amazon CFO Brian Olsavsky clarified during Thursday’s earnings call that the $4 billion cost this quarter isn’t entirely related to money spent on new initiatives — it also includes more arbitrary costs like “productivity drags” stemming from social distancing and longer breaks.

“There’s productivity drags for things like new hire ramps, social distancing, extended break periods — things that we can quantify and say, this is a change in our process that has hurt productivity,” Olsavsky said.

The increased cost in COVID-related expenses for this quarter appeared to have spooked some investors, as Amazon’s stock dropped about 1% in after-hours trading, even though its third-quarter results exceeded Wall Street expectations. Amazon said its fourth-quarter operating profits will fall between $1.0 billion and $4.5 billion, below the $5.81 billion Street estimate, in part due to the COVID-related expenses.

Olsavsky said the majority of the COVID-related costs have been created due to Amazon’s massive expansion this year. Amazon is on pace to grow its logistics footprint by 50% this year, and has increased its workforce by 50% in the third quarter to 1.13 million total employees, the first time crossing the 1 million mark.

Olsavsky added there are more direct costs involved as well, around “cleaning, supplies, and testing,” in reference to the protective equipment and COVID testing for employees and the enhanced cleaning of warehouse facilities. 

Still, the bulk of its COVID-related costs are related to the loss in productivity, he said.

“The largest portion of these costs relate to continued productivity headwinds in our facilities, including process revisions to allow for social distancing and incremental costs to ramp up new facilities and the large influx of new employees hired to support strong customer demand,” Olsavsky said.

By quantifying this, Olsavsky said Amazon is able to show how incremental these costs are, adding that the company expects them to be one-time expenses and not recur once the pandemic is over. He also noted that there’s a lot of “uncertainty” in its guidance this quarter, due to the upcoming election and other issues related to the pandemic. 

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CHE – Chemed (CHE) Beats Q3 Earnings and Revenue Estimates

Chemed (CHE Free Report) came out with quarterly earnings of $4.86 per share, beating the Zacks Consensus Estimate of $3.99 per share. This compares to earnings of $3.46 per share a year ago. These figures are adjusted for non-recurring items.

This quarterly report represents an earnings surprise of 21.80%. A quarter ago, it was expected that this operator of the Roto-Rooter plumbing service and Vitas Healthcare hospices would post earnings of $3.79 per share when it actually produced earnings of $4.41, delivering a surprise of 16.36%.

Over the last four quarters, the company has surpassed consensus EPS estimates four times.

Chemed, which belongs to the Zacks Medical – Outpatient and Home Healthcare industry, posted revenues of $528.30 million for the quarter ended September 2020, surpassing the Zacks Consensus Estimate by 2.17%. This compares to year-ago revenues of $480.61 million. The company has topped consensus revenue estimates two times over the last four quarters.

The sustainability of the stock’s immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management’s commentary on the earnings call.

Chemed shares have added about 7.6% since the beginning of the year versus the S&P 500’s gain of 1.3%.

What’s Next for Chemed?

While Chemed has outperformed the market so far this year, the question that comes to investors’ minds is: what’s next for the stock?

There are no easy answers to this key question, but one reliable measure that can help investors address this is the company’s earnings outlook. Not only does this include current consensus earnings expectations for the coming quarter(s), but also how these expectations have changed lately.

Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. Investors can track such revisions by themselves or rely on a tried-and-tested rating tool like the Zacks Rank, which has an impressive track record of harnessing the power of earnings estimate revisions.

Ahead of this earnings release, the estimate revisions trend for Chemed was mixed. While the magnitude and direction of estimate revisions could change following the company’s just-released earnings report, the current status translates into a Zacks Rank #3 (Hold) for the stock. So, the shares are expected to perform in line with the market in the near future. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

It will be interesting to see how estimates for the coming quarters and current fiscal year change in the days ahead. The current consensus EPS estimate is $4.44 on $545.83 million in revenues for the coming quarter and $16.37 on $2.08 billion in revenues for the current fiscal year.

Investors should be mindful of the fact that the outlook for the industry can have a material impact on the performance of the stock as well. In terms of the Zacks Industry Rank, Medical – Outpatient and Home Healthcare is currently in the top 42% of the 250 plus Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.

MLM – Martin Marietta Materials, Inc. (MLM) CEO Howard Nye on Q3 2020 Results – Earnings Call Transcript

Martin Marietta Materials, Inc. (NYSE:MLM) Q3 2020 Earnings Conference Call October 29, 2020 11:00 AM ET

Company Participants

Suzanne Osberg – VP of IR

Howard Nye – Chairman, President and CEO

James Nickolas – SVP and CFO

Conference Call Participants

Trey Grooms – Stephens

Kathryn Thompson – Thompson Research

Paul Roger – Exane

Jerry Revich – Goldman Sachs

Anthony Pettinari – Citi

Stanley Elliott – Stifel

Garik Shmois – Loop Capital

Phil Ng – Jefferies

Seldon Clarke – Deutsche Bank

David MacGregor – Longbow Research

Michael Dudas – Vertical Research

Adam Thalhimer – Thompson Davis

Adrian Huerta – JPMorgan


Good morning, ladies and gentlemen. Welcome to Martin Marietta’s Third Quarter 2020 Earnings Conference Call. My name is Alan, I’ll be today’s coordinator. 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 and will be available for replay on the Company’s website.

I will now turn the call over to your host, Ms. Suzanne Osberg, Martin Marietta’s Vice President of Investor Relations. Suzanne, you may begin.

Suzanne Osberg

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 Nickolas, 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 website.

We have made available during this webcast and on the Investors Relation 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 SEC filings.

Effective July 1, in connection with our 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 Nickolas 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.

Howard Nye

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 Marietta’s history with the company-wide lost time and total injury incident rates exceeding world-class levels.

For the third quarter, increased pricing across all product lines and disciplined cost management help 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 $0.87 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’ve taken to adjust the company’s cost profile.

Now, for a review of our third quarter operating performance, aggregates 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, aggregates shipments to both the infrastructure and non-residential markets declined, shipments to the residential market improved modestly.

Aggregates average selling price increased 2.7% or 4% on a mix-adjusted basis, underscoring this product lines resilient pricing power. By region, the East Group posted a 4.4% 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 priced 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%.

Underlying 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%, reflecting continued energy sector headwinds.

Reported cement pricing increased 1% while average selling prices for our core cement products, namely Type 1 and Type 2 cement were up $4 over the prior-year period, lower shipments of oil well and lightweight specialty cements bound for West Texas disproportionately impacted overall pricing growth. As a reminder, specialty cements can sell for over $200 per ton. On a mix-adjusted 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 performance there. Favorable geographic mix from robust Colorado shipments was the primary driver of the 2% increase in third quarter concrete price.

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?

James Nickolas

Thank you, Ward, and good morning to all.

For the third quarter, the Building Materials business delivered products and services revenues of $1.2 billion, a 6% decrease from the prior year period and product gross profit of $384 million, a 3% decrease. Aggregates product gross margin expanded 130 basis point to 36.4% an all-time record despite lower shipment volume.

Strong mix adjusted pricing gains, disciplined cost management and lower diesel fuel costs contributed to 6.5% growth in aggregates unit profitability. These results demonstrate the cost flexibility and resiliency of our aggregates-led business.

Cement product gross margin was 40.2%, a 40 basis point decline. Despite lower revenues, the Cement business benefited from lower fuel cost and prior year tail investments that have improved reliability and throughput. For our downstream businesses, ready-mix concrete product gross margin declined 90 basis, 9.7% attributable, the higher cost to raw material.

Asphalt and paving achieved record gross profit of $32 million and a 140 basis point improvement margin despite lower revenue. Magnesia Specialties third quarter product revenues decreased 7% to $55 million reflecting lower demand for chemicals and lime products. So revenues and reduced fixed cost absorption resulted in a 240 basis point decline and product gross margin to 38%.

Our consolidated results included $70 million of gains on surplus from non-core land sales and divested assets. These gains, which were recorded in other operating income net are non-recurring and should not be extrapolated in a run-rate calculation.

As a reminder, surplus land sales were part of the value proposition of our TXI acquisition and that’s exactly what you see in this quarter. Since 2016, we have sold nearly $200 million of excess land that was not used for operations and did not contain operating assets. While we cannot predict the timing of any future land sales, we expect additional non-core real estate divestitures as favorable opportunities develop.

We achieved the highest adjusted EBITDA margin in Martin Marietta’s history, both inclusive and exclusive of the previously discussed non-recurring gains. We anticipate adjusted EBITDA to range from $1.35 billion to $1.37 billion inclusive of the $7 million non-recurring gains for full year 2020.

Now, turning to capital allocation and liquidity. We continue to balance our longstanding disciplined capital allocation priorities to responsibly grow our business, while maintaining a healthy balance sheet and preserving financial flexibility to further enhance shareholder value. Our priorities remain focused on value-enhancing acquisitions and prudent organic capital investment and a consistent return of capital to shareholders while maintaining our investment grade credit rating profile.

In August, we acquired an aggregates and ready-mix concrete company in Dallas-Fort Worth Metroplex. These acquired operations complement our existing geographic footprint and expand our customer base. We also enhance our aggregates and cement throughput to drive incremental upstream value.

We have widened our full year capital expenditures guidance and now expect it to range from $350 million to $400 million. We are exploring additional lifetime exchange opportunities that was defer the taxes we would otherwise pay on this year’s sizable land sales.

Since our repurchase authorization announcement in February 2015, we have returned $1.8 billion to shareholders through a combination of share repurchases in meaningful, sustainable dividend. Our Board of Directors recently approved a 4% increase in our quarterly cash dividend paid in September, underscoring its continued confidence in our future performance and cash generation.

Our annualized cash dividend rate is now $2.28. Share repurchase activity remain temporary pause during the quarter. However, repurchases can resume at management’s discretion. With a debt-to-EBITDA ratio of 2 times, we were at the lower end of our target leverage range of 2 to 2.5 times.

We remain confident in our balance sheet strength with $1.2 billion total liquidity. With our low leverage and ample liquidity, we retain the financial flexibility to continue to profitably grow our business.

With that, I will turn the call back over to Ward for his market trends commentary and preliminary outlooks for 2021.

Howard Nye

Thanks Jim.

We’re confident that our favorable pricing dynamics will continue and that attractive underlying fundamentals and long-term secular growth trends across our key geographies will remain intact.

To offer some specific color on how this is playing out, it’s notable that both our upstream and downstream businesses have seen improvements in daily shipment trends since July lows with October average data shipments above prior year levels. While we’re cautiously optimistic about these trends, we believe COVID-19 related uncertainty will likely persist through the winter and spring season.

Keeping that in mind, we currently anticipate product demand will remain modest through the first half of 2021 and product pricing will remain strong. As the U.S. economy resets from COVID-19 disruptions, the longer-term macroeconomic indicators such as undeveloped conditions, historically low interest rates and hourly workforce availability are favorable and should support a construction-led recovery.

We’re seeing encouraging long-term trends across our three primary end use markets and key geographies, including bipartisan support for robust multi-year federal surface transportation reauthorization, heavy industrial activity to support e-commerce and remote work needs and single-family housing expansion, driven by accelerated de-organization. We believe these trends bode well for more aggregates intensive construction cycle that experience during the slow but steady recovery from the Great Recession.

Infrastructure activity, particularly for aggregates intensive highways, roads and streets continues to be resilient. With gas and tax sales revenue shortfalls less than originally anticipated, State Departments of Transportation or DOT budgets are in better condition than expected at the pandemics onset. For example, Texas DOT scheduled lettings for fiscal year 2021 which began September 1 are currently planned at $10 billion, an increase of 35% over the comparable fiscal year 2020 lettings.

Updated Colorado DOT projections indicate relatively flat transportation spending levels for 2021 and North Carolina DOT which temporarily suspended awards for certain projects in response to pre-COVID-19 funding issues and other factors, recently revised its letting schedule upward and resume bidding for resurfacing work earlier this month. As a reminder, these three key states represent over 60% of our Building Materials business revenues.

On the federal front, the President recently signed into law a continuing resolution that included a one-year extension at the Fixing America’s Surface Transportation Act or FAST Act at current funding levels which was consistent with our expectations. In our view, this provides state and local governments, the visibility needed to plan, design and let transportation projects through the 2021 construction season.

Over the medium to long-term future, we expect the industry to benefit from the passage of a reauthorized comprehensive federal surface transportation package which we anticipate will be enacted by mid-2021. Both the United States House and Senate have advanced federal highway legislation, underscoring bipartisan support to remedy the nation’s crumbling surface transportation infrastructure.

Notably, both those provide the first sizable increase in federal transportation funding in more than 15 years. Regardless of the upcoming election outcomes, increased infrastructure investment, it should provide volume stability and drive aggregates shipments closer to 45% of our total shipments moving us toward our 10-year historical average. For reference, aggregate shipments to the infrastructure market accounted for 38% of third quarter shipments.

Although certain sectors of non-residential construction remained challenged in the near-term, COVID-19 is driving a paradigm shift that should promote more diverse non-residential demand from the previous cycle, fueling long-term aggregates growth.

Accelerating technology, e-commerce and remote work trends require increased investment in heavy industrial warehouses and data centers which are generally more aggregates intensive than by commercial construction due to the size and scale of these projects.

Importantly, we have purposefully shifted our non-residential exposure over the last 10 years or so to be more heavily industrially focused as we’ve expanded our geographic footprint along major commerce corridors. Additionally, light commercial construction, despite its current weak demand should benefit in the longer-term from the drag along effects of strong single-family residential trends. Aggregate shipments at the non-residential market accounted for 33% of third quarter shipments.

Single-family housing is expected to lead this economic recovery as the organization accelerates. Prospective homebuyers are increasingly moving from large metropolitan cities to smaller metro or suburban areas with the pandemic.

Recently, North Carolina, our third largest state by revenues, was identified as a top migration destination ranking number seven among states that experienced the most inbound moves from March through August of this year, according to data from United Van Lines.

These trends extend beyond those moving from one state to another. They also include existing restaurants opting to move farther out from city centers. Across our Southeastern and Southwestern footprint, under those conditions and favorable population and unemployment dynamics provide Martin Marietta with a distinct competitive advantage for outsized secular growth in single-family housing development.

Importantly, single-family housing is two to three times the aggregates intensity, but multi-family housing, given the ancillary non-residential and infrastructure needs of new suburban communities. Aggregate shipments to the residential market accounted for 24% of third quarter shipments.

In summary, as our third quarter and year-to-date results demonstrate, navigating challenging times and emerging from them stronger are hallmarks of our company. We’ve executed a thoughtful strategy and taken deliberate steps to position Martin Marietta as a resilient, efficient and cash flow generative business that can consistently drive shareholder value creation. We will continue to do what we do best. Manage our business safely and responsibly, ensuring that we’re prepared to seize profitable growth opportunities for the benefit of our stakeholders.

Martin Marietta remains well-positioned to capitalize on the emerging growth trends that are expected to support steady and sustainable construction activity over the long-term. With our attractive underlying fundamentals, strategic priorities and best in-class teams, we are excited about our bright prospects for driving long-term sustainable growth and shareholder value in the fourth quarter, in 2021 and well into the future.

If the operator will now provide the required instructions, we’ll turn our attention to addressing your questions.

Question-and-Answer Session


[Operator Instructions] Our first question comes from Trey Grooms with Stephens. Your line is now open.

Trey Grooms

Well, thanks for taking my question, and thanks for the color. And really, I want to dive in first on the aggregates margins. I mean, very strong, especially given the lower volume and also, one of your highest priced highest market states, North Carolina is pretty challenged, so pretty strong there. And so, Ward, could you update us on maybe some of the cost tailwinds that you’re seeing in the aggregates business? Clearly diesel but it seems like there is much more at work here and how do you think about the sustainability?

Howard Nye

Trey, thanks for the question. No, you are entirely right to put up these numbers, but as you said, North Carolina is not at peak of its game right now, we think it’s going to be back to normal, by the way mid half year, next year, but what we’ve done in this very impressive quarter is done a good by arm and half tied behind our back because North Carolina is down, but it’s not going to stay down.

Then Magnesia Specialties is going through the foot moral right now, but it’s not going to stay down either. So what you’re seeing is really a two-fold impact Trey, one, pricing was very good and that’s something that we come to expect and you come to expect as have our shareholders.

So there are no surprises there. It’s nice to see it performing in resilient fashion. Again, one of your closed down to double-digits on volume. But to your point, I think what we’re really seeing, even separate and distinct from the energy piece of it, is very good cost performance and that’s something that our team has been focused on, it’s nothing that’s new to Martin Marietta, you can see it also in the SG&A numbers.

But if I go through and look at where we’ll be not just in energy, but where we’ll be relative to contract services, repairs, supplies, and other plant costs, all down, and that’s exactly what we would anticipate.

As you recall, Trey, we’ve gone through cycles. We tend to invest very carefully in our company. And when we were going through the financial crisis in the Great Recession, we did pull back on CapEx. At the same time in the last few years, we’ve taken CapEx up and that has truly been an investment in our business. So what we’re seeing the benefits of is a better cost profile, operational excellence, cost performance across the spectrum that we would anticipate.

And the other thing that’s important, Trey, is the way that we’ve grown our business. So when we’ve added businesses as we have in Colorado and what we’ve done in Texas with TXI and what you’re seeing from excess real estate sales and similarly, what we’ve done with Bluegrass, these have all been enhancing this organization, but it’s truly aggregates led and you’re seeing good performance come through on the cost side, which again is exactly what we would have expected.

And the thing that I’ve really enjoyed and I am so grateful with this team on is continuing to show their agility and being able to manage that on the fly and as they would need. We’re always going to remember 2020 as the year that could have been, because if you’re seeing this type of performance with volumes down, you can imagine what I believe we’d be doing this year if we were not in the midst of the pandemic.

Trey Grooms

Thanks, Ward, that’s encouraging and helpful. So my follow-up product demand. I think you mentioned in your prepared remarks, you’re expecting to be modest through the first half of ’21 and pricing will remain strong. Could you go into any more color there for next year, maybe a high-level look at the end markets? And does this imply a return to volume growth in the back half or an acceleration, what’s the – what’s your messaging there?

Howard Nye

Trey, that’s another great question. I would say several things. I would think in the back half, which is certainly big calling towards volume growth. I mean, here we are in Q3, which is the single largest quarter for the industry, it’s the largest quarter for Martin Marietta, and we’re down 9%.

So, I would expect, in half through next year, we are seeing growth. Keep in mind, half – quarter one is really a rather inconsequential quarter. There is very little volume that goes in Q1. The season really begins in earnest for a business like ours in May because that’s when you’ll have everything open across an enterprise including those parts of the country, it tend to be more weather-affected.

So what I say on a comparative basis, Q1 would be a tough compare, yes, but it’s not going to be huge tonnage. As a practical matter, the pandemic really started settling in as we went into Q2. But I would think, when we get to the back half of next year we should start to see the economy grow in some ways. I do think the deurbanization trends that we’re seeing, will help us nicely on housing.

I think Martin Marietta is going to be a very nice beneficiary of that because you saw the data that I revealed even on North Carolina relative to United Van Lines data, but that same data is true for Georgia, and it’s true for Florida, and it’s true for Texas, and it’s true for Colorado. And again, when we start going through those impacts states, it matters. I think that’s something that’s real, and we’re going launch we go into 2021.

The other thing that I would say relative to 2021, Trey, is infrastructure looks a lot better today than we thought, infrastructure was going to look when we were half year. So, if we look back at even for a tech stocks, so they were going to be at half year as they were thinking about 2021. They were $7.5 billion, so they’ve got a 10 handle in front of that today.

We’re looking at a state like Colorado, they’re saying it’s going to be relatively flat, and we know our third largest state by revenue in North Carolina is going to be better, when we get into the second half of the calendar year of 2021. Remember these states work on fiscal years that in large part end on June 30.

I think the end use that’s going to be the one that we need to watch most carefully is not a surprise to anyone, it’s going to be non-residential. And I think you’re going to have a tale of two different stories in non-res. I think the heavy side of it, Trey, is going to be pretty good. I mean, I’ll give you a sense of it. In the Greater San Antonio area all by itself right now, we are bidding on right for six different Amazon fulfillment centers just in that marketplace.

So, we’re looking at heavy side non-res in states where we have very intentionally built our business. We think that’s going to look attractive. So whether it’s data warehousing, warehousing or otherwise, we think that’s going to be good. And I do think hospitality is going to be challenged for a while. I think vary degrees of energy on a comparative basis are going to be challenged for a little while and I think office and retail will as well.

But here’s what I would say, if the housing trends continued the way that we believe that they will, and we believe it’s going to be more single-family driven, we’re going to see homebuilders buying more land, we’re going to see them entitling that land and we’re going to see the drag along effect hopefully not in ’21 but probably more going into ’22 of the light portion of non-res.

So what I’ll try to do Trey, in response to your question is, go through those three primary end users that we have and speak to at least what we’re seeing relative to trends right now. Obviously, when we come out with our full year results in February, then you get the more precise guidance. We’ll get much more granularity to that, but again my commentary saying that this October compared to last October looks pretty good. We like that as a data point.

Trey Grooms

Absolutely. Well, thanks for taking my questions. I do want to say one last thing though. I think this goes overlooked sometimes by the analyst and investor community, but I did want to call out the safety record that you guys have achieved, I mean blasting rock and working around heavy equipment can be a dangerous business, so hats off to you on that achievement.


Our next question comes from Kathryn Thompson with Thompson Research. Your line is now open.

Kathryn Thompson

First, focusing on the Cement segment, could you give some more color on the backlogs for this segment, particularly when you look over the next 12 months? And what does this mean for pricing environment, given it was, needless to say, an unusual year this year for pricing? Thanks.

Howard Nye

No, look, you’re right, it’s been an unusual year but at the same time, what I’d say Kathryn is, pricing, if we’re really looking cement segments it’s up 3.4%. So pricing in cement, in Texas is behaving like aggregates. And keep in mind, that’s something that we’ve long said we thought it would be the case.

If we look at our cement backlogs, I’ll tell you that that’s one of the great stories because we’re seeing cement backlogs up 24% on strong infrastructure bookings and primarily a large job that Tesla has going on in the Austin area and some property that we sold them. So the backlog situation looks quite good there. And actually the pricing was pretty good, Kathryn.

If you look at it, the optics, the pricing and the reality of them are two very different things. Because the reality is, energy sector sales for us, which are not a big amount of tons were down 74% in West Texas. So a big percentage, but small tons. But the reason that’s so important and we call it out in the prepared comments, that’s where that cement sales were over $200 a ton.

So if we’re coming back and just looking at Type 1 and Type 2 cement in San Antonio and in Dallas, those numbers are actually up very nicely, and we think that that’s likely what we’re going to see next year as well.

Now, in fairness, we have said that we’re going to take cement pricing up in April of next year and we have a letter out to that effect right now and we’re talking about $9 in that Texas marketplace next year. So I think that gives you a sense of how pricing has behaved this year, what has been the mix effect on it, what this Type 1 and Type 2 look like.

The other thing that I’ll note Kathryn, because this is important too, is we have continued to see efficiency improvement quarter-over-quarter, year-over-year in our cement business. So kind of what I would call out for you is volume is down, but the cement EBITDA in Q3, the margin of 46.2%, represents actually a new quarterly record. So we’re getting it both ways, we’re doing it the hard way on costs, but we’re doing it the other way on pricing as well, but again backlogs up 23%. We’re a little bit over 270,000 tons.

Kathryn Thompson

And then the follow-up question is more on the infrastructure side, particularly with state DOTs. You have confirmed that in all of the Gulf issues, that the worst appears to be behind for North Carolina. Could you – just got to confirm what gives you optimism for that, but also looking at other key states like Georgia, who is still continuing to move along and Texas and other key markets that are important for you, from an infrastructure standpoint. Particularly against the backdrop of how they are looking into next year? Thank you.

Howard Nye

Sure. Happy to, couple of things. One, Texas, I’ll just go through them in order of revenues. So Texas has huge FY ’20, ’21 lettings of $10.2 billion, we spoke about that just a minute ago. That’s going to have a multi-year benefit to Martin Marietta. Our backlogs in that state are up in all three product lines and we see some very large projects coming in 2021.

What’s important to our members across seven funding is currently projected at a full $2.5 billion, even as we’re looking at cropped one that’s looking at $620 million. And keep in mind, none of that anticipates Texas having to tap into their $10 billion rainy day funds. So again, Texas feels very healthy even compared to where we were half year.

Colorado looks pretty flattish and that’s what we are expecting. We see construction activity there that’s being supported by about a $1.8 billion four-year bond program. Two years remain on that and that could provide an additional $1 billion or more. So we’re feeling good about where that state is, again, a nice improvement over where it was at half year.

The North Carolina DOT situation that you called out very specifically and appropriately is improving. And part of what we’ve seen even in the last week is North Carolina mail is sending out some double A-rated bonds, they were just rated last week. It’s going to be $700 million of build North Carolina bonds.

And importantly, the state has started – what we started lettings and anticipates about $1.3 billion of it – of FY ’21 lettings and that’s pretty similar to the pre-pandemic numbers of about $1.4 billion. So again, we’re feeling much better about North Carolina and that’s one that we obviously stay very close to.

Similarly, you asked about Georgia and we’re anticipating there relatively flat DOT spending at about $2 billion. But part of what we think is important is it appears that Georgia is going to advance at least two of the major mobility projects in Atlanta. They’re not going to have a ’21 start, but they’re likely to have a ’22 start. And remember, these are major mobility projects at about $12 billion and their primary aim is to reduce congestion along key corridors in Georgia.

And the last one, at least in our top five is Florida DOT, and again, we’re looking at something there that we think is going to be very steady year-over-year. Keep in mind, they’ve got a very healthy P3 program in that state, so you’ve got a lot of activity in Florida. So again, if we look at our top five states and that’s exactly what I’ve just taken you through from an infrastructure perspective, year-over-year, we like the looks of that.


Our next question comes from Paul Roger with Exane. Your line is open.

Paul Roger

It’s Paul Roger. Yes, can you just say they – obviously, it’s a big week next week with the election, can you just speak a bit about the potential implications of the different outcomes? And also, if there is a new highway bill or maybe some stimulus as well, when you think that would impact demand on the ground, is it likely to be a 2022 story?

Howard Nye

Paul, thanks for the question. It’s good to hear your voice. Yes, I would say that we are one of the few industries that probably can’t lose next week and here’s what I mean by that. If the President is re-elected, we anticipate there is going to be a new highway bill and we think it’s probably going to be up very similar to the Senate’s number, that’s 28% over FAST Act and that being the largest increase all by itself in 15 years.

Similarly, if we should have a change in part of the White House and Mr. Biden is elected and the fact is, the democratic-controlled House is looking at a 41% increase in highway spending. So here’s what I would say, if the President’s re-elected, it’s going up and it’s going up with less regulation.

If Mr. Biden is elected, it’s going up with probably more regulation. And the irony of that is, we actually do pretty well with regulation. Well, we’ve got great teams, they are very sophisticated, they can deal with that very efficiently. So we – I believe, either way, Martin Marietta will be well-positioned.

If there is more regulation, one of the things that we certainly see that drive in the past is perhaps more M&A opportunity as well, because often times, if you’re looking at a higher tax, higher regulatory environment, closely-held kind of businesses start reconsidering what their long-term future is as well. So, as we sit here and anticipate what different outcomes could be, it can change the way that we’re going to think about some things around the margin, but in large measure, we think under either one of those scenarios, Martin Marietta does very well.

Paul Roger

And that’s very clear. I mean, within spinning your opening remarks, you inferred that this would have obviously been a fantastic year were it not the COVID. If you see a situation where we do get some volume growth again in 2021, are you basically suggesting there is a lot so if you can go on the margins? And I guess particularly if some of the more profitable market, like the Carolina’s stabilized all good.

Howard Nye

Well, I would say a couple of things. One, volume will always be this industry’s friend because you’re going to have a certain degree of cost, but as much as we’d like to be at a flex costs as much as we can, some of them are going to be fixed, it’s a big heavy industry, but I think we control cost extraordinarily well.

Again, I think geography, from a mixed perspective, actually this quarter, was not particularly upper end. So, if we see these Eastern markets behaving in a more robust fashion and volume hits those markets, it could be pretty impressive relative to margin. Keep in mind, in the East this year, we saw a significant project delays and we saw extremely wet weather in what was formerly the Mid-Atlantic Division.

And again, we’ve discussed the fact that we saw lower NCDOT funding, that’s going to be remedy, and we saw most win part activity. So, if we look at that didn’t happen in the East and things that we don’t think will continue to recur into the future, we think that’s probably very attractive for our margins.

The other thing that I would say is I would not expect the cost that we have been very good at controlling this year to go backwards on us. I think the investments that we have made on capital will be our friend. Now in fairness, there is a piece of that that’s tied up in energy and there are a lot of things we can control.

I wish, I could tell you that we could control overall energy prices, but we can’t, but at the same time, as energy has tended to move upward, keep in mind, that’s also served historically as the mechanism plus to make sure that we can cover that with increased average selling prices as well.

So, I do think relative to margins, geography is likely to be more of a friend, they are not going forward, and I think this is the type of cost performance that you should expect us to continue to deliver.


Our next question comes from Jerry Revich with Goldman Sachs. Your line is now open.

Jerry Revich

Ward, in your opening remarks, you were optimistic about pricing into ’21, which is really interesting considering pricing typically falls volumes, and obviously we’re looking at a pretty tough back half of this year and first half of ’21. So could you just expand on those comments, what’s enabling you to achieve the strong pricing and what have you announced the customers for ’21 if I got the gist of your opening remarks right?

Howard Nye

No, you did, Jerry. I guess what I would say is that, I’m not sure if there was anything strikingly new about the observations I was making on ’21. I think the primary thing that I just want to underscore is that pricing is something that we tend to do really well in Martin Marietta. When volumes go up, pricing goes up, when volumes go down, pricing still goes up.

And in this quarter I thought it was pretty good, because there are not a lot of industries that could come forward with volume down line and pricing up the way that we saw pricing up this year. So I think that’s the underlying theme that I want to make sure that I underscore.

I think the other thing to remember, Jerry, is we’re seeing that as we pointed out in some of the conversations we’ve had, with actually one of our higher-priced – higher profitable businesses not at the top of their game this year, because of what’s not coming out of NCDOT. So again, I think we’ll continue to see a good price trajectory in large part because we’re in many good locations.

And I think as we continue to see superfamily housing go up, that’s actually an area that we tend to do quite well in housing on, because if you’re thinking about people who will at least try to utilize some form of volume, on occasion, as a lever to talk to you about pricing, that’s typically not the home door, because at the end of the day, there is so many things they care deeply about in the home, but the news flash is the price of crushed stone usually is not one of them.

So I think if we end up seeing a new highway bill, we see the volume that we think will come from that, probably not in ’21, but as practical matter coming in ’22, but we see a very healthy residential market and then we see the drag along in the growth of time of the like non-res. I think all of that pretends very well for pricing. And again, if we look at those top five states that are disproportionately important to us and you look at even what’s happened with cement pricing in Texas, I think that tells you that the overall marketplace is at a pretty healthy spot.

Jerry Revich

And so we’re normally in this type of volume environment, I would have thought aggregates pricing should be up in the 2% range. And it sounds like, based on your comments that, you’re announcing the customers is more or like the pricing we saw in ’20 than what I’m describing.

Howard Nye

Well, and again, we’ll give you even more granularity around that when we come out in February, because some of those conversations are still ongoing. But again, I think you get the overall sense that there is nothing in our pricing model that we feel like has been shaken by this strange time to the world navigating together.


Our next question comes from Anthony Pettinari with Citi. Your line is now open.

Anthony Pettinari

Ward on the decision to re-establish full-year guidance, I mean is it fair to say you were surprised by the resilience you saw in your end markets or maybe some of those cost factors that boosted margins, or was it just more of a function of having one quarter left in the year? I’m just wondering if you could talk – you kind of walk us through the decision-making process and what you saw specifically that may be comfortable with re-establishing the guide.

Howard Nye

Yes, Anthony, thank you for the question. I think part of it is – you could deepen up into something that strange and you start to figure it out a little bit. So, I think candidly, that’s part of it. The other – another part of it is, Anthony, there is just not that much runway left this year and we’ve got a pretty good sense of how October is looking.

Obviously, Q4 itself can have some swing factors to it, and obviously one of them is, when does weather really set in earnest. It’s been interesting Anthony, because there have been years that we have been paving almost up to Christmas in Colorado and equally, there have been years that well before Thanksgiving, it was shut down. So, obviously, we’ll try to bracket but we think Q4 can like from just a volume perspective, we know what it’s going to look like from a pricing perspective. And we believe we’ve got a pretty good handle on what it’s going to look like from a cost perspective as well.

So, I think those were the factors candidly that went into it and again in the conversation that I was having just a few minutes ago with Jerry and others on the end users. We’re trying to get as – we are just taking a look into ’21 as we can, but again, we feel pretty good about all of them.

Anthony Pettinari

Okay, that’s very helpful. And then you talked about some of the project delays that you saw earlier in the year. I’m just wondering from a big picture perspective, the pace of project delays or cancellations that you saw over the course of the quarter, did that pace – was apparently stable or did it is ease, maybe you saw some more projects come back than you expected or any kind of general thoughts there.

Howard Nye

Yes, I would say several things. One, we see deferrals, we don’t see cancellations and I think that’s an important bifurcation to draw, because pushing projects to the right is an entirely different animal than calling them off. So during the financial crisis in the Great Recession, we saw projects cancel, that’s not what we’re seeing. So I want to call that.

The other is, in some instances, we simply saw weather deferrals. So obviously, we’ve had some hurricanes that have come in through the Southwest this year and we’ve had a good bit of rain in the Southeast. But the primary place that, again, I think we’re taking some good comfort is when we’re seeing North Carolina DOT start re-letting some surface transportation again, in some respects for the first time in almost a year.

So when we see that state beginning to return to something that feels more like in a patience, a normal start as rhythm, that certainly feels better to us. So we’re – we did not see anything relative to deferrals in the quarter that we thought were extraordinary or surprised us.

And in many respects, what I would say is from a volume perspective, I don’t think we’re very surprised this quarter. I think from a pricing perspective, we were not surprised. And I’m not going to tell you that from a cost perspective we were surprised, I would tell you, gratified, is probably the right word, but again, we expect to see more of that going into the future, not less up.


Our next question comes from Stanley Elliott with Stifel. Your line is now open.

Stanley Elliott

Thank you for taking the question. Ward, when you talked about or talking to your residential contractors, are you getting a sense that they’re actually looking to buy land now and build out new subdivisions or that, they’re busy enough just keeping pace with what they are? And I am curious kind of in the context that we’ve heard about a lot of delays for higher lumber prices and things like that. Any thoughts to what extent that could be kind of a governor on the residential recovery into next year?

Howard Nye

Stanley, that’s a great question. And what I think is this, one, they’re busy and busy usually begets busy. And number two, I do think the shift that we’re seeing in the Great American move – moving more away from multifamily, moving to single-family where people frankly want some space but they haven’t had for the last several years is going to lead to the necessity of buying more land. And by the way, we don’t think that’s a bad thing.

We actually think that’s a good thing, because if we look at the markets in which we are operating one, they tend to have land, two, the entitlement for new subdivisions isn’t something that’s highly difficult to do, and three, the ability to borrow money is there. So we feel like all of that’s important.

The other piece of it, Stanley, that we think is important is these markets are not overbuilt and that’s such a fundamentally different place. And part of what we spoke about in the half-year call is, we’ve seen single-family move around over the last couple of decades. So single-family recovery is, we’re really looking at coming out with the great financial crisis. So also about 70% of starts versus what had typically been closer to 80%.

So if we’re seeing it move back to a more of a normalized portion of what we would expect single-family to be, particularly as we’re looking at these deurbanization trends, that is we’re looking at states in which we have a significant presence, Texas, Colorado, North Carolina, Georgia, Florida. Those are going to be cities and those are going to be states that would be grown out, not states that will be growing up and places that are growing out tend to be more aggregates intensive.

So yes, I think our builders are busy. Yes, I think they will have to buy more land. I think they will be in the entitlement business but I think in the areas where we are the entitlements, would not end up being significant, I’ll have to use your word, I think it’s a good one, a governor, on what housing growth is going to look like.

Stanley Elliott

Great. And then just switching gears, thinking about kind of the leverage range that you guys have talked about operating in the past, I mean you are kind of there right now. Barring any sort of thing on the CapEx side, it should be another good year of cash flow. How – are you more comfortable given the uncertain environment to kind of let the cash build? Is there some things on the M&A front that seem intriguing right now, just curious how you’re thinking about the capital deployment into next year.

Howard Nye

Stanley, that’s a great question and you’re right, we’re at the low end of our range. So our debt-to-EBITDA ratio is at two times today. You’ve seen that steadily come down and I’m proud of the way that we pulled that down. As you know, our capital priorities have not changed. And our capital priorities are to find the right acquisition. We think there may be some opportunities in 2021 that we’re certainly looking at, the deal pipeline has become more active here over the last few months and that does not surprise us.

And equally, the other thing that we’re waiting to watch and everybody else in this call is too, what happens in the election? And it will be odd. For example, if we do see a wider new streak go to the United States and we see a higher regulatory regime come in, as I indicated earlier, we have certainly seen that as something that they can serve as a bit of a catalyst for M&A activity as well.

So I think we want to make sure that we keep ourselves in a very flexible spot. Obviously, it’s in management’s discretion whether we go in and turn back on the repurchases, we will certainly look at that and think through it carefully.

You did see us – as Jim commented in his opening comments, we raised our dividend in September, so our September shareholders have already benefited from that. So I like where we sit from a balance sheet perspective, but equally Stanley, and I think this is important as we think about M&A, I like where we sit from a regulatory perspective as well. The areas the country where we would be most interested in growing particularly if we’re looking to establish new footprints.

We’ve got a lot of white space and we have a lot of regulatory ability, from a Hart-Scott-Rodino perspective. And I think our teams have proven that they are very good at one, identifying transactions, number two, going through the process of memorializing it and then upon closing, pulling the synergy side of it as well.

So we’re going to find good uses for that cash, whether it’s investing in Martin Marietta, returning to shareholders or finding right deal, but you know how we rank those in order, Stanley.


Our next question comes from Garik Shmois with Loop Capital. Your line is open.

Garik Shmois

On non-residential construction, is there any way to quantify how much of the non-res volume split is between the heavy industrial piece versus the retail and office, just given the shift you’ve made more towards the heavy non-res side over the last several years?

Howard Nye

Absolutely, Stanley. Stanley, as you recall, historically, non-res would have been around 30% of our business and then over the last several quarters, you’ve seen it actually considerably more than that, it’s closer to the mid-30s. And you’ll recall historically, this was really when I give you this background. This is pre-TXI, this is pre river for the Rocky’s, this is pre-Bluegrass.

We would have said, it’s almost a 50-50 break between light on one hand and heavy on the other. As we’ve done these large transactions, as we come out of the river, as we have focused our business increasingly on these large commerce corridors, we feel like it – now the heavy side of it is probably at least 60%.

So it’s probably moved that much just as we’ve done these transactions. And it’s interesting to go back and revisit that number I gave just a few minutes ago, even talking about the fact that in the San Antonio area right now, we’re bidding on seven Amazon warehouses data center projects at various stages of bidding.

So the locations where we’ve been, whether it’s on the I-25 corridor, whether it’s on the I-35 corridor, whether it’s on the l-85 corridor or the l-95 corridor has really helped move that. And if you think about those corridor, l-95 was significantly changed by Bluegrass. I-85 was significantly changed about what we did with the assets that we acquired in Atlanta. l-35 was significantly changed by what we did with TXI and I-25 was completely remade with what we did in the River for the River – I mean River for the Rocky swap.

So the percentage shift is probably 60%, 40% today but again, non-res has moved to a bigger piece of the pie in large measure, because infrastructure has underperformed as we’ve gone through a series of re-authorizations that unlike next year, has not gone up in value over the last 15 years.

Garik Shmois

Okay, thanks for that. Also just wanted to follow up on the guidance that you provided for the year. I don’t want to focus too much on 4Q because it’s a seasonally slower part of the year, but just given that…

Howard Nye


Garik Shmois

How you provided on the October growth, I mean what do you think is driving the increase? Is it project timing, catch up from maybe some of the weather headwinds that you saw in 3Q? And then maybe just more broadly, how to calibrate the different ends of the guidance ranges?

Howard Nye

Yes, I think several things probably. One, we don’t have some things going on this year that we had going on last year. They were actually varying degrees of headwinds last year. So if you go back to it, part of what you’ll see is, we did have some increased grading last year we’re stripping employees, we did accelerate some maintenance at our Hunter Cement Plant. And our Granite Canyon quarry which sits in Southern Miami, which feeds that very vibrant Northern Colorado market was later coming on last year, then we would have hoped.

And then Hurricane Dorian sided with Freeport Bahamas last year, a little bit longer that we would have wished though. Number one, they actually put some headwinds in Q4 last year and we’re thinking we’re probably past some of that this year, but equally, I think the October trends are nice. I think part of what we’re seeing is some of the work, particularly in Central Texas as Tesla is building their bigger factory on the property that we sold them, that certainly add some benefits.

And again, if we see something that feels like a normal winter cadence, we’re very comfortable with what we feel like would be the midpoint of that range. So it – that at least gives you a sense of what the puts and takes would be in the little bit of the year that’s left. I hope that’s helpful.


And our next question comes from Phil Ng with Jefferies. Your line is now open.

Phil Ng

If we think of some of the policy optionality go into next year. If we get a stimulus package this is separate from a longer-term authorization bill.

Howard Nye


Phil Ng

Do you see that impact coming through a little quicker on the demand side where the lag is shorter because maybe states can dial-up lettings mid-year and see a benefit 2021? And then…

Howard Nye


Phil Ng

…typically it’s like a year plus lag. Okay, so you can…

Howard Nye

No, Yes, I think they can, because part of what’s happened, Phil is, if we go back over time, several things. If you look at the way different states came out of the financial crisis, some states ended up hiring more people in DOTs, Texas is a good example. Some states started doing more outsourcing, North Carolina is a good example, which means at least as we’re sitting here today, they have more projects that are engineered the designed, right-of-way has been purchased and they’re in a position if they want to go that they can.

And I think that’s a very fundamentally different place. So to your point, if there is a pace for or if there is anything else and there is simply as you know, AASHTO has long been advocating for about $37 billion that they feel like should go roughly to states to help fill the hole that was created because yes, tax revenues weren’t there.

Now keep in mind, early in the year, they said that hole is going to be $50 billion, so that hole got a lot narrower or – not as deep over time. But to your point, if that money went directly to NCDOT, do they have plenty of uses for today? Absolutely. It’s weather floating $400 million worth of bonds, could Texas do the same thing? To be sure, and could Colorado do the same thing? Absolutely, because again if you look at that state they are metering out there buying activity over time and that can simply come in and help augment that.

So I do think your point’s a good one, because most of what we’ve been discussing to date has been around the reauthorized bill and what the timing would look like on that. And again, we’re saying passage in ’21, but the real event from a tonnage is probably ’22. But I do think if you’ve got some near-term stimulus that could actually be at ’21 about.

Phil Ng

And then I think the margins in the quarter is certainly really impressive in light of the weaker volumes. But when we think out the 2021, assuming you have a little inflation not deflation like you’ve seen this year on energy, and you get some pricing and lower volumes. Do you have enough levers there to kind of drive unit economics higher or at least keep it flat and any color on the gross margin side as well.

Howard Nye

Yes, that, I – we’ll obviously give you some really good guidance on that in February, but I think part of what we’re trying to outline bill is, this is a really impressive quarter with volumes down almost double-digits and our most profitable business with its arm tied behind its back. So again, our backlogs, for example, in Texas look very good.

So I think we can feel good about where that business is heading into ’21. Obviously NCDOT is letting some jobs. I think we’ve been increasingly good about that. If the Eastern business gets some momentum going into ’21 even in the back half, so that’s where your story would be.


Our next question comes from Seldon Clarke with Deutsche Bank. Your line is open.

Seldon Clarke

I guess just based on where October is trending right now and obviously, weather can be a prevention to this. But just based on where October is trending and how you’re positioned from a non-resi perspective, and the improvement there you’re talking to in regards to the outlook for state and federal funding. Is it fair then to say that 3Q will probably represent the steepest of the volume declines throughout this sort of downturn?

Howard Nye

Yes, that wouldn’t surprise me. And again we’ll come out with more granular information in February. But if we think about it, Seldon, this is the big quarter and keep in mind, this was a big quarter last year. So this was the beast of compares. And it’s always interesting to look at how percentages can work in Q1, but I would suggest you percentages in Q1 helped me a lot because the tonnage is so slow.

So it would not surprise me but this on a percentage down, unless we see things just changed dramatically. It would not surprise me that this would be your states single steepest client, to use your words.

Seldon Clarke

And then you gave some context around aggregates potentially going from 38% to 45% of the shipments with one of these highway bills. But I guess, just can you just help us understand sort of the relationship between a 28% or 45% increase in annual spending on coming from the government? And how that relates to your actual product demand, if we go back and look at some of these historical highlights…

Howard Nye

Yes. I guess…

Seldon Clarke

It was actually 28% growth. So how do you think about that?

Howard Nye

Yes. I guess the way we think of it, if we look at the states in which we see significant population trends and then that’s going to be our top five states, where there will be capacity needs and capacity issue.

So if you take that Georgia mobility program and think about that in more than just an Atlanta contracts and you think about the Atlanta, but you think also about Columbia, South Carolina and Jacksonville, Florida and Orlando and Raleigh and Charlotte, and then you start looking at 9 miles added. That’s your single most aggregates intensive undertake because several things happen.

So then it’s taking a lot of tonnage, but it’s taking a lot of vary tonnage as well. So you are you putting based products down, you are venture to put in clean stone and either asphalt or concrete and that’s going down. So you’re taking the entire way of more products. So number one, that’s actually very healthy for inventories. Number two, it’s actually very healthy for the way that we can run our business.

Now can you take a crushing plant, hold it in some degree and produce less space and more clean stone so we – but I mean it’s not a science and doing that because it’s not that easy, but as a practical matter, if you’ve got a wider array of products going out that will intend to be the case, if you have a new highway bill and you’ve got capacity that is being added in states. What that does from an operating efficiency and what it does from an inventory efficiency is incredibly helpful. And part of that we’ve seen over the last several years is what would appear to be a fairly significant outperformance in non-residential.

And what I would tell you is non-residential has actually been quite good but non-residential hasn’t been really on fire. It’s really that the public side of it has been slower than it should have been. So if we see more infrastructure go, it’s high spec material, it’s a material that we can deliver and we think of these states in which we’re operating as they add needed capacity, it adds tonnage and it adds efficiency. I hope that helpful.


Our next question comes from David MacGregor with Longbow Research. Your line is now open.

David MacGregor

So, I guess lot has been covered here in the past hour, so I’ll just make a couple of quick ones. I guess in ready-mix, it seems like maybe there’s just a price pass through issue, do we catch that up in the fourth quarter? Is this just a timing issue or is there something maybe more structural in the markets that’s coming in the play here?

Howard Nye

No, I would say several things, one, we saw good price in Colorado and we saw some mix shifts in Texas. So I think that’s largely what you see. And look, the other piece of it is, hey, the concrete business paid more for aggregates and the concrete business paid more for cement and that’s okay from where we sit, because we’re providing most of the aggregates and we’re providing most of the cement and so that’s a lot of what was going on there.

But really, if you look at it, nice 2.2% per ton better on ASP. So a lot of good things that we’re seeing in ready-mix right now, but in large measure, it helps undergo a very attractive upstream business, so it’s doing exactly what we would have thought.

David MacGregor

Right, right. Second question is really just on Houston and in aggregates, you talked about the lower rail tons going into Houston. Is that a function just what’s happening in energy or are you seeing congestion or any reduced level of service in rail?

Howard Nye

Well, service and rail has been reasonably good and it’s really not so much Houston, it’s really more South Texas when you get down to the pure LNG projects that are – or even closer to the water. And that was really a piece of the mix issues in the Southwest, because if we had fewer tons coming out of those yards, as you know those tons are transportation loaded, David, so that was really the big shift there. So it wasn’t as much of our Houston metro per se issue because there is some very good projects going on in Houston, including the Grand Parkway.

And for example, we’ve seen a good amount of cement go to that and as you may recall that, actually cement is modestly lower priced in San Antonio than it is in Dallas and things are going to the Grand Parkway are really coming out of Hunter facility. So we’re not seeing bad activity in Houston, whatsoever, it was really more cost to oriented on that commentary.


Our next question comes from Michael Dudas with Vertical Research. Your line is open.

Michael Dudas

Ward, we appreciate the insight on your – some of your tops important states, but maybe you can highlight quiet a couple in the – on the second side or others where you’ve seen some either positive or negative trends that might be helpful to help out a little bit more on say that the volume expectations is some of these macro events impact second quarter ’21 and ’22.

Howard Nye

Look, I’ll certainly time and if we’re looking at South Carolina, they’re going to FY 2021 program would buy $1.8 billion, that’s up about 15%, so we like what we’re seeing there. The South Carolina did something the other year that was very on South Carolina of them and that is they raise the gas tax. So they are taking that up incrementally over a period of six years. We’re about halfway through that, so we’re seeing good activity there.

All of that, we’re really Arkansas passed a 10-year $10 billion funding plan so that basically doubles their funding over $8 billion over a 10-year plan and we like where we see that business going. Keeping in mind, we’ve got a very attractive business in and around Arkansas City and we’re seeing good activity at the airport there as well.

Our business in Indiana, just to be clear, we call it our Indiana district that we have historically, it’s really our Indianapolis district and what we’ve seen in that business and the leadership there has just done a superb job of controlling costs exceptionally well. I mean they really do deserve a call out on that, but they equally done very well and making sure we’re getting good recognition on pricing on what we’re doing in that marketplace.

I think Indiana is looking quite strong. If I’m looking questions just to be completely open book with you on where we’ve seen more difficulty this year, it’s been in places like Kentucky and portions of Savina Hill. Kentucky DOT has not had its finest moment this year and I think equally you’ve heard that from others is they have gone through, I think you would have heard a bit of that from Summit and its commentary earlier in the week as well.

But if we’re looking at places like Maryland, and we’re looking at Virginia, and Iowa, in Nebraska, and as going through those, just give you a sense of it, Michael, that does round out our top 10 states which is going to be 85% of our revenue.

They’re not things that we feel like are troubling to us as we looked at Maryland, Virginia, Iowa, or Nebraska right now, again, Maryland has a very significant T3 program, and the other states just tend to be very solid states. Remember, Iowa consume on average more stone per capita than any place else because they go through a hard place sale cycle each year and it’s a big farm to market economy, but equally that’s been an economy that has been served quite well by what’s happening relative to data warehousing.

So we’ve seen Microsoft and Amazon and others, not just build warehousing but Phases 2 or Phases 3 and sometimes Phases 4 of that, so that’s actually been quite good. The one area in the Midwest that has been more challenging this year has been plus not happened relative to wind energy and we call that out on some of the commentary that we had just breaking down between business in our East Group and business in our West Group, but hopefully that was responsive to taking a little bit deeper dive in the bottom five.

Michael Dudas

We’re certainly was and I wasn’t treating about the factoring on Iowa I was not aware of. Thank you.

Howard Nye

That’s would what we give for. Take care, Michael.

Michael Dudas

Thank you.


Our next question comes from Adam Thalhimer with Thompson Davis. Your line is now open.

Adam Thalhimer

Can I ask a quick question, and then I’ll turn it over. But I wanted to ask on ready-mix, if you could comment on the backlogs in ready-mix and also the outlook for pricing forth?

Howard Nye

No, no, happy to. I mean, it’s interesting, but are different pricing is always a little bit challenging at least in half, outlook and pricing in Colorado tends to be very attractive pricing, outlook on pricing in Texas continues to look pretty steady. I would tell you is we look at backlogs year-over-year, there are 3% and if you’re looking at a very dynamic market I like the way that works.

So, again part of what we’ve done in Texas in particular item is, we’ve moved a certain degree of our volume in Texas from infrastructure, in some instances to housing and I will tell you very candidly, why we did it, we wanted to have it and a little bit more of that in housing, one, because housing look good; and two, housing does not tend to be as weather-sensitive it’s infrastructure as.

Now that said, housing tends to have a little bit lower ASPs. So we’re picking and choosing very much by design there, but again we think pricing will be solid and we think backlogs in that business right now are actually up in the Southwest.


Our next question comes from Adrian Huerta with JPMorgan. Your line is now open.

Adrian Huerta

Thank you for taking my question. I wanted to just to ask on, you have mentioned in the past there was room on recent acquisitions to increase prices, how far are you on that, is there still room to increase prices from recent acquisitions?

Howard Nye

Adrian, it’s always a journey, it’s like safety, we never think we’re done. And what I would say if we go back and look at the way things have worked. One of the best examples I can give you is Maryland and we were talking about just a moment ago with Michael, what some of the states look like that were not in our top five and I spoke, specifically the Maryland.

And then what’s interesting to me on that, Adrian, is Maryland for us in the Bluegrass transaction was not necessarily a consolidation play. We had a couple of facilities in that state there in the western part of the state, and most of what we acquired Bluegrass there was in Maryland, who was really more in Baltimore metro. And what we brought to that is a discipline and we brought to it a sense of not being ashamed to make sure we are getting the right value for a product that we’re making that needs, state and federal specifications, and that we think it’s not easy to do.

And keeping in mind that, on the infrastructure side, stone is about 10% of the cost of building road, on the housing side, it’s about 2% of the cost of a home and if we look at non-residential at somewhere between those two numbers. In other words, our product is never going to be, but it’s going to make or break whether the project goes or not. Equally, our product isn’t going to make or break whether that contractors typically low or not, but at the same time to do what we do with the scale that we do and do it as safely as we do. We want to make sure we’re getting good value for something that’s a depleting resource.

Now that said, if we look on average at today’s rates of taking start on the ground, we’ve got a century with reserves left. So we don’t have an issue of the stone going away, but in a world that we think will continue to have higher regulatory barriers and burdens to entry, making sure we’re getting value for this product is important.

I will tell you, equally, you can see what our average selling prices and it’s going to be in the low teens, right now, but there are plenty of markets in the United States where we’re selling aggregates for numbers that have a two in front of it and we don’t see those higher numbers having any degree of chilling effect on construction in those markets.

So this has been an area for our company that has been one of strength for a long time. Back to my point, this continues to be a journey. I think it’s going to be an area of strength for years yet to come, Adrian.

Howard Nye

Thank you all for joining our third quarter 2020 earnings conference call. Moving forward, we are confident in Martin Marietta’s opportunities to build on our successful track record of strong financial, safety and operational performance and remain focused on maximizing value for all shareholders.

We look forward to discussing our fourth quarter and full year 2020 results in February. As always, we’re available for any follow-up questions.

Thank you for your time and continued support of Martin Marietta. Please stay safe and healthy.


Ladies and gentlemen, this concludes today’s conference call. Thank you for participating.