Martin Marietta Materials, Inc.

Good morning, ladies and gentlemen, and welcome to Martin Marietta's fourth quarter and full year 2018 earnings conference call. My name is Sonia, and I'll be your coordinator today. At this time, all participants have been placed 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. I will now turn the call over to your host, Ms. Suzanne Osberg, Vice President of Investor Relations for Martin Marietta. Ms. Osberg, you may be in.

Good morning and thank you for joining Martin Marietta's fourth quarter and full year 2018 earnings call. With me today are Ward Nye, Chairman and Chief Executive Officer, and Jim Nicholas, Senior Vice President and Chief Financial Officer. To facilitate today's discussion, we have made available during this webcast and on the investor relations section of our website, 2018 supplemental information that summarizes our financial results and trends. As detailed on slide two, this conference call may include forward-looking statements as defined by securities laws in connection with future events, future operating results, or financial performance. Like other businesses, we are 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. We refer you to the legal disclaimers contained in today's earnings release and other filings with the Securities and Exchange Commission, which are available on both our own and the SEC websites. Please note that all financial and operating results discussed today are for full year 2018. Any comparisons are versus the prior year unless otherwise noted, and all margin references are based on revenues. Furthermore, Non-GAAP measures are defined and reconciled to the nearest GAAP measure and our 2018 supplemental information and SEC filings. We will begin today's earnings call with Ward Nye, who will discuss our operating performance as well as market trends and expectations for 2019. Jim Nicholas will review our 2018 financial results. A question and answer session will follow. I will now turn the call over to Ward.

Thank you, Suzanne, and thank you all for joining today's teleconference. Martin Marietta's success is rooted in our commitment to our core values and the disciplined execution of our strategic operating analysis and review, or SOAR, process. Today's reported results clearly demonstrate the benefits of our approach as we once again delivered record financial and safety performance and did so without the benefit of meaningful shipment growth across our heritage building materials business. For the full year, consolidated revenues increased 7% to a record $4.2 billion, and adjusted earnings before interest, taxes, depreciation, and amortization, or EBITDA, increased 9% to a record $1.1 billion. These outstanding results were driven largely by solid pricing gains across the building materials business and the bluegrass materials acquisition, the second largest transaction in our company's history. We also established new records for net earnings and earnings per diluted share, excluding the one-time benefit from the Tax Cuts and Jobs Act of 2017 on prior year earnings. As you've heard us say before, every facet of our business starts with safety. We're particularly proud to have built upon 2017's record results to achieve the best heritage safety performance in our company's history. Teams at our newest operations have also worked diligently to improve their safety performance, embracing our guardian angel and wingman cultures. Company-wide, we achieved world-class lost-time incident rate levels for the second year in a row. Elevated safety awareness across the company has also reduced downtime from workplace incidents, leading to higher revenues and profitability. Our ability to repeatedly deliver record financial and safety performance validates the importance of SOAR and our successful execution of that plan, especially in light of last year's environment where aggregate shipments on a comparable basis remained only modestly above 2010 trough levels. To emphasize, Martin Marietta has continued to steadily improve key financial metrics, chief among them profits, even its shipment volumes adjusted for acquisitions, that approximate great recession levels. Importantly, we continue to strengthen our foundation for longer-term success through strategic geographic positioning, price discipline, and prudent capital allocation. That's why we're more confident than ever about Mark Marietta's ability to drive continued profitability growth and enhanced shareholder value. In sum, we expect 2019 to be another record year for our company. What gives us that confidence for 2019? It's all about our geography and culture. Construction growth from the combination of emerging public sector activity and continued private sector strength in our key geographies should outpace the nation as a whole, driving improved shipment, pricing and profitability. Our geographic footprint is concentrated in areas with attractive underlying market fundamentals, including notable employment gains, population growth, and superior state fiscal health. These fundamentals should promote steady and sustainable construction growth for the foreseeable future. Robust underlying demand, customer optimism, and third-party forecasts also bolster this positive outlook. Moreover, throughout 2018, we experienced strong shipment volumes on days not adversely impacted by extraordinary precipitation and or extreme temperatures as further demonstrated during the fourth quarter. These trends, combined with a favorable pricing environment, are clear indicators of underlying market strength and customer demand, underscoring the near-term growth trajectory of our business. Importantly, too, we have the right teams, structure, and organizational culture to leverage these positive trends for the great benefit of our many stakeholders. Before we discuss in more detail where we're headed in 2019, Let's quickly review full year 2018 operating results. We and our entire industry started last year with high expectations. Martin Marietta, along with our customers, peers, and third-party forecasters, anticipated accelerated construction activity. These expectations formed the basis of our original 2018 aggregates volume guidance of a 4% to 6% increase. Weather, contractor capacity issues, and logistics disruptions, however, challenged both our company and the sector throughout the year. These dynamics precluded customers from meaningfully addressing their mounting books of business. As a result, heritage aggregate shipments adjusted for shipments from the Forsyth County, Georgia quarry we divested in April 2018, in conjunction with the Bluegrass Materials acquisition, increased only slightly over 2017. It's important to remember that these well-chronicled headwinds are transient in nature and will ameliorate. serving to extend the construction cycle. The silver lining from these project delays is a notable increase in both customer and Martin Marietta backlogs as we head into 2019. In 2018, heritage aggregates pricing improved 3% in line with our expectations. This improvement was achieved despite the negative impact of product mix, which lowered the company's full year average selling price by 13 cents per ton, or 1%. Underlying market demand should continue to support ongoing pricing momentum. Acquired operations shipped 13 million tons at selling prices 10% to 15% below the corporate average, but in line with our expectations. We're pleased to report that integration is substantially complete and synergy realization has exceeded our expectations at the time of acquisition. Full-year cement shipments increased 1%, as an extended maintenance outage at our Midlothian plant put us behind early in the year and was further compounded by record precipitation in Texas in February, September, and October. Cement pricing increased 3%, consistent with our expectations. Our cement operations will continue to benefit from a tight supply environment, as forecasted demand is expected to exceed domestic production capacity by 10% in 2019. Ready-mix concrete shipments increased slightly in 2018 as weather dampened construction activity. Pricing improvement of 1.5% is best described as a tale of two markets, where solid pricing gains in Colorado were partially offset by product and geographic mix in Texas. In Colorado, project delays and permitting issues negatively impacted our asphalt and paving business throughout 2018, as more contractors bid on both a reduced number of, as well as a more geographically concentrated, Colorado Department of Transportation projects. This transitory situation should improve in 2019 with greater Colorado DOT funding and more dispersed public works. We remain highly confident in the strength of the Colorado market. I'll now turn the call over to Jim to discuss more specifically our four-year financial results. Jim? Thank you, Ward. Thank you.

The building materials business achieved record products and services revenues of $3,712,000,000. This is a 7% increase over 2017 and the company's ninth consecutive year of revenue growth. Reported gross profit decreased slightly and included a $19,000,000 negative impact related to selling acquired inventory after it was marked up to fair value as part of acquisition accounting. The acquired bluegrass operations contributed $149 million of product revenues and adjusted gross margins comparable with our heritage mid-Atlantic and southeast operations. Overall aggregate product gross margin was 25.8%, a 230 basis point reduction compared with the prior year. Weather disruptions and higher diesel expenses combined with lower inventory build and the acquired inventory adjustment negatively impacted our cost and efficiency profile. As Ward mentioned, our Texas cement operations benefited from pricing and modest volume growth. Production efficiencies more than offset increased natural gas, freight, and raw material costs, leading to a 100 basis point expansion of product gross margin to 32.5%. For the third year in a row, Magnesia Specialties posted record revenues and profitability as the business benefited from strong domestic steel production and increased global demand for magnesia chemical products. Notably, international sales represented 35% of total chemical sales, up from 20% just four years ago. Pricing improvements and production efficiencies contributed to a 110 basis point expansion in product gross margin to 38.3%. Consistent with SOAR, we continually evaluate our asset portfolio to ensure our business is positioned to generate industry-leading operational and financial performance. Accordingly, in December, we recorded a $12 million non-cash charge in other operating expenses for the West Group. This charge was related to asset and portfolio rationalizations within our Southwest ready-mixed concrete business. Martin Rietta continues to create shareholder value through value-enhancing acquisitions, prudent organic investment, and the opportunistic deployment of free cash flow through growing dividends and share repurchases, all while returning to our target leverage ratio. In 2018, we deployed $376 million of capital into our business and returned nearly $217 million to our shareholders through both an increased dividend and and the repurchase of 522,000 shares of our common stock. Since the announcement of our share repurchase program in February 2015, we have returned more than $1.4 billion to shareholders through a combination of meaningful and sustainable dividends and share repurchases. The 12 months ended December 2018. Our ratio of consolidated net debt to consolidated EBITDA, as defined in the applicable credit agreement, was 2.76 times, which is modestly above the top end of our target leverage ratio. Weather headwinds contributed to a lower than anticipated fourth quarter EBITDA, and as a result, our leverage ratio was slightly higher than expected, despite reducing debt by $90 million during the quarter. For 2019, both higher EBITDA and additional debt repayments will drive leverage lower, placing the company within its targeted two 2.5 times leverage ratio by year end. With that, I will turn the call back over to Ward to discuss our 2019 outlook. Jim, thanks.

This year, Martin Marietta celebrates 25 years as a public company. Building on our strengths, we're well positioned to deliver another record year. As outlined in our 2019 guidance included in today's release, Increased infrastructure activity and continued private sector gains, in addition to a four-year contribution from the former bluegrass operations, are expected to produce positive volume trends across all of our product lines and contribute to an even more favorable pricing environment across our footprint. Following more than a decade of underinvestment, we believe infrastructure construction activity, particularly for aggregates-intensive highways and streets, is poised for meaningful growth in 2019 and beyond. The infrastructure market represented only 39% of 2018 aggregate shipments, well below the company's most recent 10-year average of 46%. Funding provided by the Fixing America's Surface and Transportation Act, or FAST Act, combined with actions taken at the state and local levels, has resulted in an acceleration in public lettings and contract awards in our key states of Texas, Colorado, North Carolina, Georgia, and Florida. Of note, we've not seen any meaningful delays in awarded contracts or construction spending resulting from the recent federal government shutdown. Our key states tend to be less dependent on federal support for highway capital projects. Federal funding provides less than 50% of annual state DOT outlays for Texas and North Carolina, two of our largest states by revenues. The Texas DOT expects to let $9.6 billion in fiscal year 2019, up over $2 billion from the prior fiscal year. Construction growth in Texas will further benefit from large-scale design-build projects in and around Dallas-Fort Worth. The North Carolina DOT has over $4 billion letting scheduled for fiscal 2019, of which over half will be let in key eastern Martin Marietta markets. States continue to play an expanded role in infrastructure investment. Incremental funding at the state level through bond issuances, toll roads, and tax initiatives should grow at a faster rate than federal funding, leading to increased growth opportunities for our company. Our top ten states, which accounted for 85 percent of total building materials revenues in 2018, have all introduced incremental transportation funding measures within the last five years. Most recently, voters approved 79% of the state and local transportation initiatives on the November ballot, providing over $30 billion of targeted transportation funding across the nation. Rebuilding our nation's infrastructure is good for the economy, creates jobs, and has bipartisan support. With the government now reopened, we're hopeful that meaningful progress will be made to advance a federal bill with a comprehensive, sustainable, and sufficient funding mechanism to address our nation's unmet infrastructure needs. Although we'll not see any meaningful uplift in shipments in 2019 should an infrastructure bill be enacted this year, and our 2019 outlook does not factor in any such benefit, new funding will provide better visibility for large-scale projects and further extend the construction cycle over the next several years. Martin Marietta's private sector activity in 2019 should benefit from full employment gains and population growth across the Sun Belt. Non-residential construction activity, which represented 33% of 2018 heritage aggregate shipments, should increase in both the commercial and heavy industrial sectors for the next several years as we continue to benefit from robust distribution center, warehouse, data center, and wind energy projects in Texas and the Carolinas, Georgia, and Iowa. Both the Architectural Billings Index and the Dodge Momentum Index indicate healthy commercial and institutional construction activity in 2019. Continued federal regulatory approvals of large energy sector projects in Texas, particularly along the Gulf Coast, should notably contribute to increased heavy building materials consumption with construction activity on five projects to begin in earnest in 2019 and continue for several years thereafter. Martin Marietta is well positioned to supply the aggregates, cement, and ready-mix concrete needs for these multi-year energy projects. Residential construction, which accounted for 22% of 2018 heritage aggregate shipments, should continue to grow within our geographic footprint, particularly now that mortgage rates have stabilized. Our leading southeastern and southwestern states offer opportunities for gains in both multi- and single-family housing, driven by available land, an overall business-friendly environment, and fewer regulatory barriers. Permits are the best indicator of future housing construction activity. Currently, housing unit permit growth for our top ten states, namely Texas, Colorado, North Carolina, Georgia, Iowa, Florida, South Carolina, Indiana, Maryland, and Nebraska, outpaces the national average for all three residential categories, total, multifamily, and single family. On a national level, housing starts improved over 2017 levels, but remain well below the 50-year historical average of 1.5 million. Population growth, increased household formations, and low inventories should continue to drive demand for residential construction. In summary, for 2019, we expect aggregate shipments to increase 6% to 8% with growth in all three primary construction and use markets. Specifically, infrastructure shipments are expected to increase in the high single digits. Non-residential shipments are expected to increase in the mid to high single digits, and residential shipments are expected to increase in the mid single digits. Annual price increases have already widely garnered market support. most importantly in Texas, the Carolinas, and Southeast. To that end, we expect aggregates pricing to increase in a range of 3% to 5%. We expect cement product revenues to range from $400 million to $430 million and gross profit from $130 million to $150 million as our cement operations benefit from underlying market fundamentals, weather deferred shipments, solid pricing momentum, and new sales outlets. Lighting mixed concrete and asphalt paving revenues are expected to be in the range of $1.2 billion to $1.3 billion, and gross profit is expected to be $130 million to $150 million. The magnesia specialties business is expected to have another great year, with product revenues of $270 million to $280 million, and gross profit of $100 million to $105 million. These expectations reflect continued strength in global magnesia demand and domestic steel utilization. On a consolidated basis, we expect total revenues of $4,480,000,000 to $4,680,000,000 and EBITDA of $1,170,000,000 to $1,280,000,000. To conclude, 2018 was a momentous year for Martin Marietta with the best financial and heritage safety performance in our company's history. Martin Marietta is confident in its outlook and prospects for continued growth and value creation. We believe our leading market positions, disciplined pricing strategy, and successful execution of our strategic plan have positioned our company for continued success. Attractive population and employment trends, combined with positive momentum from state DOTs, should drive construction growth in our key regions that outpaces the nation as a whole and contribute to a favorable putting environment as we work towards another record year in 2019. If the operator will now provide the required instructions, we will turn our attention to addressing your questions.

Thank you. Ladies and gentlemen, if you have a question at this time, please press star then 1 on your touch-tone telephone. If your question has been answered or you wish to move yourself from the queue, please press the pound key. To prevent any background noise, we ask that you please place your line on mute once your question has been stated. In the interest of time, we ask that you please limit yourself to one question and one follow-up. Any additional questions, please re-enter the queue. Our first question comes from Catherine Thompson of Thompson Research Group. Your line is now open.

Hi. Thank you for taking my questions today. The first question is just on guidance. What gives you confidence on the parameters that you outlined for 19 guidance? And what would be helpful is to better understand what is and isn't baked into guidance, ranging from, I hate to say weather, but weather to capital projects and other factors that could impact the overall guidance. Thank you.

Good morning, Catherine. Thank you for the question. I think several things underscore our confidence. Number one is what we see simply emerging on infrastructure. If we look at what is going to happen in Texas and Colorado and North Carolina and Florida, those are big numbers this year. If we look at Texas, they're looking at lettings of $9.6 billion this year. That's considerably over last year. Prop 7 funding is $4.2 billion. Prop 1 funding at $1.3 billion. tremendous numbers. If we look at North Carolina, $4.1 billion worth of lettings and 2.3 of that in eastern North Carolina, which is an important state for us. Last year, Colorado really ran into a cash flow problem that they do not anticipate this year. Last year, they basically had $384 million worth of lettings. This year, 653. And next year, Catherine, 964. So when we're seeing those types of numbers in an infrastructure environment, it really does give you a lot of confidence, particularly in those states. But the other thing that I think we feel moved by is the strength that we continue to see both in non-residential and residential. If we're looking at res, total permits in our states are up 9%, which is almost double the average in the U.S. Single families up 7%, again, 2% better than the overall U.S. And multifamily is up 15% in our markets overall. That's almost three times the national rate. So remember, non-RES in many respects will continue to follow that. So if we think about what we believe has happened with infrastructure, returning to something that feels more like a 10-year average of nicely over 45% of our business, a healthy non-RES, good solid RES, and then we come back and look at simply what customers are telling us. So if we're listening to our customers, What I'll hear is this. Our customers along the Atlantic coast have 3 million tons more work right now than they did last year. If we're looking in the southwest, that number feels more like 15 million tons. And if we're looking at our aggregates business in the Rocky Mountains, last year at this point of time, they had about 50% of their revenues booked. This year, more like 64%. So we've got some very attractive numbers. But you asked the right question, Catherine, that is how do you factor in weather? Here's how we think about that. We're thinking and planning for wetter than usual. We're not planning for apocalyptic, but we are planning for wetter than usual. We think based on the last several years, that's simply a sensible way to go about it, and that's the way that we've tried to factor it. But emerging infrastructure, continued private sector gains, a full year of bluegrass, and modestly better weather. is really the way that we're trying to capture the year. I hope that's helpful and responsive.

Yes, it is. And then my follow-up question is more on free cash as we look forward. Could you discuss a free cash ramp in 2019? What are the relevant puts and takes and thoughts on uses of cash in 2019? Thank you.

Well, I'll ask Jim to address that with more specificity. Look, the short answer is we're going to have an embarrassment of riches problems when we think about that because If you think about the share cash this business kicks off, it's very attractive. I think we're well positioned to capitalize our business. We obviously raised a dividend last year. But let me turn to my colleague, Jim Nicholas. He can speak to that in more detail.

Good morning, Catherine. As always, the first call on our capital is the right acquisition. There's no change. That will be the case in 2019 and beyond. Beyond that, reinvesting in the business. Our cap-back spending should be close to flat versus 18. We spent 376 in 18. It's going to be flat in 19, 350 to 400 million, so the same zip code. And then next, as I march down our priority list, returning capital to shareholders. As Ward mentioned, we increased the dividend last August by 9%, much larger than our typical increase. I'd expect something larger than typical this year, subject to, obviously, our board approval. And then in 18, we resumed our share purchase program. We bought back $100 billion. of our shares in 2018. We'll likely continue to repurchase shares in 2019 as well. And then, of course, we'll continue deleveraging by paying down debt. We're above our target leverage ratio, and we're going to pay down debt until we get into that range. So those are the areas we're going to focus on. As you know, our cash flow is back half loaded, so that's when most of the cash deployment will occur. And just kind of level set some changes in 2019 versus 2018. We contributed $150 million in discretionary funds to our pension plan in 2018 that will not repeat in 2019. And slightly offsetting that, we expect our cash taxes to be closer to $90 million in 2019 versus something closer to $30 million in 2018. So hopefully that answers your question.

It does. Thank you.

Catherine, thanks a lot.

Thank you. Our next question comes from Tray Groom of Stevenson. You're going to open.

All right. Good morning, everyone. Hi, Tray. Ward, I know you guys are baking in the kind of range of 3 to 5 percent pricing in aggregates, but can you give us, you know, any additional color on your view on pricing in aggregates as well as on cement pricing as you look into 2019?

Sure. I think it's going to be an attractive pricing year this year. One thing that's worth saying, in the three to five, keep in mind, when we bought Bluegrass, we said their pricing was about 10% to 15% below our heritage pricing. So when you're looking at three to five, remember that's fully loaded with Bluegrass's pricing in there that's lower than ours. So number one, factor that in. Number two, even if you're looking at the fourth quarter this year, and I think this is an important thing to remember from a momentum perspective, If you just look at it optically, you see pricing in the fourth quarter in the mid twos. If you take out some of the product mix that we saw in the quarter, and what I really mean by that, Trey, is we sold a large amount of sand in central Texas and some sand in parts of North Carolina that's simply a lower-priced product. If we really even it out for product mix, we were seeing pricing even in the fourth quarter more around 4%, which is the same thing that we would have seen for the full year. So keep in mind, that was 4% in 2018 on what was basically flat heritage volumes. We're going into a year where I think volumes will be better. Obviously, we've done some transactions during the course of the year, so we feel very good about where we sit with pricing going into the year. The other half of your question was relative to cement and how we see that. And as a reminder, what we put out is an $8 a ton cement price increase effective April 1. We feel very solid about that and where we sit on that today. I think that's particularly true in North Texas. I think we feel fine about Central Texas, but I think we feel particularly strong about North Texas. One thing that's worth adding is we have added some outlets to our cement business as well. As you may recall, we built a new sales yard in South Texas near Houston at New Caney last year. We're selling both stone and cement at that facility, and we will be selling some cement in West Texas out of Odessa as well. So, again, we think we see a healthy pricing environment in both aggregates and in cement across our footprint. I hope that helps, Trey.

Yeah, absolutely, Ward. Thank you. And just for clarity, You did mention a 1% negative mix, I think, from product mix on pricing. As you look into 19, is there any impact that you're expecting on the mix front there?

No, we're not. So the only impact that I would specifically call out is what I've already said relative to bluegrass, but it's separate instinct from that, not so much trend.

Got it. Okay, and then my follow-up, looking at the guidance, it looks like you guys are assuming – you know, something around the 60% incremental margins range for the aggregates business. And, you know, I know that has been your outlook for, you know, the long-term incrementals in this business for a long time. More specifically, as we look into this year, can you talk about some of the key drivers, kind of the puts and takes that you see in that ramp in profitability versus, you know, what we saw in 2018?

Yeah, Trey, if you go back and think about it, we actually came into 18 and we said the incrementals would not be at 60% coming into 18 for a host of reasons, including what was going on, we believe, geographically. What we're seeing this year is more of a typical return to the types of business that we would expect to see in the Carolinas, Florida, Georgia. Bluegrass obviously helps in that respect as well. So I think, number one, if we simply look and see where some of the geographic positioning is going to be, we think that's helpful. Number two, You know, candidly, last year when you had apocalyptic weather, it was tough at times to keep the cost profile under control the way that we would typically like to. We see that being candidly more normalized this year. Energy was also spiky last year in some respects. We don't anticipate the same degree of spikiness in energy. And I think we expect another very attractive year in Colorado. One of the things that we've been able to do in Colorado over the last several years is is really be very constructive commercially with what we're able to do with our aggregates business there. As you may recall, when we acquired that business, it was actually on the lower end of some of our pricing. That's a tough market to get into, and we've been very constructive. We think we're getting fair returns in that market. I think that will help our incrementals as well.

Okay. I'll pass it along. Thank you very much, and good luck. Thanks, Jay.

Thank you. Our next question comes from Stanley Elliott of C4. Your line is now open.

Good morning, everyone. Thank you for taking my question. Ward, you mentioned the bluegrass integration and how well that's been tracking. I think I remember like 15 million of synergies. Can you update us on what you found out with that asset thus far? And then I guess my second question would be you mentioned M&A in the coming year or at least kind of at the top of the – capital priorities. What are you seeing in that market after what's been a pretty active go this cycle?

Good morning, Stanley. Thanks for the question. A couple of things. Yeah, look, I remember that $15 million synergy number two, so I'm right there with you. Stanley, we're going to do better than that. We're certainly tracking ahead of that, and I really need to compliment our integration teams and people in the Mideast, Mid-Atlantic, and Southeast who are making that happen. So if we step back and say... How has Bluegrass done? Bluegrass has done extraordinarily well. You know, we were looking at a year last year that was one of the wettest years in Maryland, a very wet year in Georgia, and we were still seeing EBITDA margins from that business that were consistent with what we thought we would see going into the business. So we're excited about the way that that's working. Again, I think we're tracking ahead. Well, I know we're tracking ahead on synergy, so I'm pleased with that. So there's no aspect of that business that has been troubling or surprising to us. In fact, it's hit everything that we thought it would. Looking forward, here's what I would say, Stanley. People look at a company like ours or, frankly, others in the sector. And part of what I spelled out in our opening comments is we've been a public company this year for 25 years. And during that 25 years, we haven't done quite 100 transactions, but we're in the zip code of having done 100 transactions in this industry. And there's still room to go. And what I would say is we've seen 25 years of consolidation. I think you've still got another 10 years plus of seeing that type of activity. Now, the size and scope of it will always be, it will ebb and flow, and oftentimes it's going to be opportunistic. Because family businesses will sell for a host of reasons. They may sell because of succession. They may sell because of tax reasons. They may sell because of cyclical reasons. So you never know going into a year exactly what you're going to see. But what I would say is this. Financially, I think we are extraordinarily well positioned to continue to be a leader in industry consolidation. And the other thing that I would say is I think in attractive markets that you would like to see us grow in, I believe we have the regulatory capacity to do that as well. So I'm not going to make predictions just yet on the sheer scope and size of transactions we may see. This year, a couple of years ago, I indicated I thought it would be a year of large transactions, and mercifully I was right. But I think it will continue to be a year of transactions. But you know what? I'm going to say something like that for the next several years because I think it's simply right and true. Does that help, Stanley?

It sure does. Thank you very much, and I'll pass it along. Thank you.

Thank you. Our next question comes from Nishu Sood of Deutsche Bank. The line is now open.

Thank you. So just thinking about the volumes in 2018, flat, heritage, and if there hadn't been some of the issues with the underlying market demand, you might have ended up closer to mid-single digits. How are you thinking about just how depressed the volumes were in 2018 and whether or not that could drive any make-up volumes in 2019? I know it doesn't always work that way. But is it the, you know, are you assuming that it's some continuation of some raininess maybe kind of keeps us to just that mid-single-digit volume growth? Or is there any potential that, you know, the ease of the comps in 18 might benefit 19?

Nishu, of course, welcome to the call. We're delighted to have you following this sector and welcome you. With respect to your question, I think it's a really good one. And what I would say is back to the notion of planning for a wetter-than-usual year. So I think that would tamp things down a little bit otherwise, but I think the numbers still are attractive. The issue here, the things that really move me as I think about it, when we go back and we talk about some of those numbers I mentioned before, looking at almost 20 million tons of business that customers say that they have at this time of the year that they didn't have last year, Those are really big numbers. And most of that's driven by public work. And part of what you know about public work that's so different from others, when public work is committed, public work is going to go. So if we're looking at that degree of public work in Texas, in the Carolinas, in Colorado, in Georgia, in Florida, that really does give you a lot of confidence. The other piece of it that I continue to think is moving is we see good, steady, non-residential light work, but also when we're looking at non-residential work, we continue to see what we feel like is going to be pretty attractive work that's coming our way on the heavy side of that as well. And, you know, part of what we haven't spent a lot of time talking about are those large projects in the Gulf. But we've talked about, you know, a dozen or more of those projects. And what I'll tell you right now, as we think about it, is three of them are already underway, and we have them under contracts. There are five more that we see decisions being made on in 2019. If we just look at those five, and that's Magnolia, LNG, Golden Pass, Exxon has another big project down there. There's LNG, Rio Grande LNG, and Driftwood. If we just look at those five and really tally up what those numbers look like, that's about 1.8 million cubic yards of ready mix. It's about 8.6 million tons of aggregates and nearly half a million tons of cement. So anywhere we pivot right now, whether it's infrastructure, non-res or res, some of those big three, the numbers and the activity and what we believe is coming looks pretty compelling. And when we go back and tally up what we feel like is some of the work that almost always in a year like we had last year gets pushed to the right. It doesn't go away. It just gets pushed to the right. I think those are the things that really underscore the while we're at six to eight. And again, we'll have to see how weather plays in there. But again, I think we've taken a very responsible view of weather. Is that helpful, Nishu?

No, no, that's great. And kind of continuing along those lines, just wanted to ask into some other assumptions as you're thinking about them for 19. On the volume side, the constraints at the contractor level, Logistics issues, what kind of assumptions are you making there for 2019? And then, obviously, with the backup in oil, what are you thinking about for the margin impact of potentially lower diesel and other energy costs?

Let's think about that. One, I would say relative to what's going on with labor. Let's talk about contracts and labor. The AGC put out a survey result here not long ago, and 79% of construction firms are planning to expand their payrolls in 2019. So we think that's a very, very good sign that they recognize they have to have the talent. And in many instances, they're simply going to have to pay more for it. And that's something that we've anticipated. With respect to logistics, we do see logistics getting better. We don't see them wholly going away, but we see them remarkably better. So, Nisha, if you think back to it, one of the primary issues that we ran into last year was rail and the movement of rail because we move more stone by rail than anyone else. And what I'll tell you is the performance and the conversations that we've had, whether it's been with CSX or BNSF or UP, have all been very, very constructive, and we see a better, a considerably better and improved transportation year in 2019 than we saw last year. You raised a good point relative to energy, and we'll talk about that for a second. I mean, just to give you a snapshot in Q4, Q4 relative to diesel, and that difference is the biggest single slug of what we deal with in energy. Q4 was $5.1 million higher, 23% above last year, on 11% more gallons. And, of course, the gallons for us was primarily being driven by the acquisition of bluegrass. But here's your snapshot, and here's what I think is particularly relevant. If we look at January 2019 diesel prices, they were 33 cents below where they were in Q4. So as a practical matter, I think you're entirely right. We're going to have probably an easier build as we go through the year. If you're really wondering how in the world we utilize that 47.5 million gallons of diesel, it's probably worth just noting somewhere in the back in Q1 we used 10 million gallons. In Q2, 12.7. In Q3, 12.8. And in Q4, 11.9. The one thing that I would remind you is in Q1, we did not have bluegrass. So what I'm trying to do is give you a sense very directly to your question, what we see happening with labor, what we see happening with transportation, and what some of the inputs are relative to fuel. I've probably given you 10% more than you bargained for, but I hope that was helpful.

That's great. Thank you for the details.

Thank you. Our next question comes from Geric Schmois of Longbow Research. The line is now open.

Hi, thank you. I just want to ask about downstream and some of your margin assumptions in ReadyMix.

Geric, are you there?

Yes, I am. Sorry, can you hear me?

I can hear you now. I'm sorry, you broke up on me for one second there. Can you repeat what you said?

Yeah, I was looking for more color in your downstream businesses, particularly in margins with expectations for asphalt, particularly with the potential decline on inputs and then on ready mix, considering 2018 was a challenging year for ready mix and ready mix margins with the expectation for 2019.

Let's talk about a couple of things. We'll hit asphalt first, then we'll pivot over to ready mix. So if we're really thinking about asphalt and some of the key points that I think of as we go into the year, In 2019, we've got 30 asphalt projects that are planning about 1.2 million tons, and last year it was more like 17 and about 549,000. So what I would tell you, year over year, that's looking considerably better. What we have, if you recall, the only asphalt play we have is up and down the front range in Colorado. So, again, it's a very refined play, and we think we're in the right place for that. One of the issues that I had outlined before was, is Colorado DOT is in a very different place this year than they were last year. So the planned advertisements, as they refer to them, their lettings, as you and I would typically refer to them, of $653 million is well above last year's at $334 million. And, again, part of what I outlined before is it's going to surge up to $964 million by the time we get to $20 million. So if we're looking at a backlog right now in asphalt and paving, it's up over 50% from where it was last year. So keep in mind, part of what I spoke to is that there were fewer but larger projects last year that had more people bidding on fewer projects. We see a very different situation in Colorado this year, and we think it's going to return to something that feels much more as it would have historically and more normalized. With respect to running mix, I would say two very distinct things. We have ready mix in the southwest. We have ready mix also in Colorado. I mentioned in the prepared remarks that really it was a tale of two businesses, right? And that was you were seeing attractive pricing in Colorado. You were seeing tougher pricing in parts of Texas. I think a lot of what was happening in Texas was, in fact, weather-driven. What I would say in Texas is this. We see strong infrastructure work in Texas. We've got nice-looking backlogs there, good work at places like the Grand Parkway in Houston, Hobby Airport. But the area that we think is going to be most moving and ready-mixed this year will be in the non-res sector. So, for example, if we look in the Metroplex, and you asked specifically about Dallas-Fort Worth, to give you a sense of it, school bonds in Dallas, $1.5 billion, Dallas County. Tarrant County, which is Fort Worth, $1.2 billion. Collin County, right there in the same area, $1.8 billion and over 19 million square feet in the construction pipeline on just broad industrial distribution type work. We also see good, steady residential work in Dallas-Fort Worth in what we think is an improved res environment in San Antonio. And the other thing that we've done is we've restructured that business a bit as well. So we've consolidated five Texas districts into the same nomenclature you would typically hear us speak to in aggregates. You'll hear us talk about north, central, and south. So we think we've got... a more attractive underlying business demand, we actually think the pricing situation is better there as well. And so what you'll see us doing effective April 1 is going out with varying degrees of price increases, but tending to be somewhere between $5 and $10 a cubic yard. Garrett, was that helpful?

Yeah, that's very helpful. Paul? Just on infrastructure, if you look out over the next two to three years, recognizing that you're seeing very good growth and extremely healthy backlogs for 2019, but with the FAST Act set to expire in 2020, I'm just wondering if you could speak to the sustainability of growth in a maybe more uncertain federal funding environment over the next several years.

The one thing that I would encourage you to look at is the way that these different states deal with that very much themselves. And what you'll see is, number one, I think we will have a successor bill to the FAST Act. So I don't sit here with a high degree of concern around what happens in that respect. The thing that I do think is most telling and helpful is to look more specifically at the way different states deal fund transportation differently and how much of what states are doing are driven either by the federal government's budget or state governments. And what you'll find when you look at states like Texas or North Carolina or Florida is that they are remarkably not dependent on what's coming out of the federal government. In fact, I think some questions were put to people at NCDOT and others, and they said, okay, what would have happened had this federal shutdown extended? And NCDOT would have said, look, we could have kept going and we would have been just fine. So I guess what I would say, when we refer back to that nearly $30 billion worth of funding that was passed in November, When you look at that and consider that each one of our top ten states over the last five years has put in additional funding mechanisms, and I still believe of all the things that the administration and the Congress can find common ground on, transportation infrastructure is still one of them. We look at that even beyond the expiration of the FAST Act right now, and we do not have a high degree of concern around that, Gary. Okay.

Thank you very much.

Thank you, Gary.

Thank you. Our next question comes from Colin Varen of Jefferies. Your line is now open.

Hey, guys. It's actually Phil. I appreciate a lot of the color you provided on your footprint exposed to some of the more attractive demographics in Rezzy. But the mid-single digit growth for next year seems pretty strong, implies an acceleration from 2018. Rezzy is probably an end market. You have a little less line of sight versus, let's say, commercial or infrastructure? So you just want to get some comfort on how confident you are on the demand front for Resi in particular.

Well, the primary thing that we think of on Resi, Phil, is really what do the builder communities look like? And we're seeing a continued very attractive drive on that. So remember, it's not as much just building of the home. It's the building of the subdivision. So what's going into the roads? What's going into the curb and gutter? What's going into the utilities? So, again, if we're looking at our top ten states and we're looking at permitting, and remember permits lead starts, so what we would see in permits in our leading ten states is they're up 9% versus the U.S. gain of up 4%. So important gains in our top ten in both single and multifamily activity, and the single is going to be something that we care deeply about. Eight of our ten states, are very positive on this, with Florida, Georgia, and Indiana even up double digits. And both Texas and North Carolina are up 7%. So, again, we see very attractive housing activity, and we feel like that's going to continue to be our friend in 2019. Does that help?

Yeah, that's helpful, Colin. And just sticking with the theme on the private side, we really appreciate the color that you provide on some of these bigger energy projects that you have in the pipeline for non-res. But curious, you know, implicit in your guide, how much of that, some of these projects that are kind of secured at this point are reflected in your guide versus some of the other projects you highlighted that could, you know, get a green light in 19, you know, be incremental, provide some upside. And when we think about some of these projects, I would imagine they're going to be multi-year projects. But any color on how to think about, you know, how long do these projects usually last would be very helpful. Thanks.

Yeah, here's what I would say, Phil. If they're secured and we've got them under contract, they're in the guidance. If they're not secured and they're more of an issue that would be nice to have, that's not in the guidance. So that's a pretty bright line on the way for you to think about that. With respect to the tenure of these projects, they tend to be multi-year. So I think if you're just thinking about it very broadly, I would think about it in two- to three-year tranches. Okay.

Thanks a lot. Appreciate it.

Thank you, Phil.

Thank you. Our next question comes from Jerry Rovich of Goldman Sachs. Your line is now open.

Good morning, everyone. This is Ben Baroud. I'm for Jerry. We're just hoping you guys could expand on the bridge that you lay out on slide 11 in your presentation. So it looks like heritage aggregates profits were down about $29 million year over year. Can you just give us an idea how much was lower production versus a year ago? and what were the other variables that offset the pricing improvement in the quarter?

Yeah. So it's, Jim, the primary driver, again, comparing versus prior year, was the inventory build. We had built inventory in Q4 of 17 that did not repeat in Q4 of 18, and that was about 3.3 million tons. So that was a $16 million headwind in the quarter alone. Now, I don't like really looking at this for, you know, it's very volatile quarter to quarter. The inventory build change can swing results quite a bit. It did that this quarter. So it's transit nature, but it did happen this year. The other big item we've got for this quarter, Q4 of 18, higher group medical insurance costs and to a lesser degree higher workman's comp. Again, that was about $10 million for this quarter versus prior year quarter for it. And I would say that's more of a, you know, we're more looking at Q4-17 was a pretty favorable comp for those two things. And so it's normalized in Q4-18 this year. But from a comp perspective, it's a headwind.

Got it. And then on slide 13, you're guiding to EBITDA growth that seems to be substantially slower than the gross profit growth you highlight. Can you provide some color as to what is driving that disconnect? Sure.

Yeah, I think we had some – in 2018, we had some EBITDA wins with some settlements and some sales of property that helped improve our EBITDA. We don't expect those to repeat in 2019. So that would account for the difference. Those were in EBITDA and that gross profit in 2018. So that's why you're seeing the difference in 2019.

Got it. Thank you. Thank you, Ben.

Thank you. Our next question comes from Adam Bellheimer of Thompson Davis. Go ahead. It's now open.

Hey, good morning, guys. Thanks for coming. Hi, Adam. My first question on aggregates pricing, Ward, do you think that's kind of building as you go through the year, or do you think it jumps up in Q1 and just kind of stays constant?

You know, I think it can vary from market to market. I think there are a number of places that aggregates price increases are going into effect in April. So I think you'll see some movement there. I think there's always the prospect in different markets for mid-years, depending on how tight specific markets get. So I don't think we're in a position to talk specifically about where or whether those will occur. But I think as a practical matter, April is where I would start really pegging that type of movement in, Adam. Okay.

And then I also wanted to ask about ready-mix concrete margins and down a bit in Q4. Just wanted to get your thoughts on when that reverses. I mean, is it possible ready-mix margins are down in the first half and then up in the second half, or do you think it recovers faster than that?

Well, I would say a couple of things. One, remember where the ready mix business is, right? So we had a very wet October. In fact, the wettest October in 124 years in Texas, and that's our single largest ready mix market in what historically is a very large ready mix month. So you take a pop in the chops there from Mother Nature. The other thing that I would remind you is the balance of our ready mix is really up and down the front range. So what I would tell you is, Don't expect a lot out of ReadyMix in Colorado in January, February, and March. So as you look at the business and its natural build over the course of the year, given the fact that a decent bit of the business is Rocky Mountain driven, I would clearly be looking more to Q2, Q3, and early Q4 for that business. I did mention before, I think we do have a more attractive pricing environment in Texas this year than we did last year. I think I mentioned earlier that effective April 1, we're looking in many respects for $5 to $10 a cubic yard. That's going to help on the margin. And the other thing that I did mention before is we have had some restructuring of that business, and we've gone from five districts to three. So remember, the aim is really to be in those mid-teens relative to margins in that business, Adam. So that's how I would think about that longer term.

Perfect. Thanks. Thank you.

Thank you. Our next question comes from Craig Bibb of CJ Securities. Your line is now open.

Hi, Ward. In your presentation, you referenced the improving backlogs, and then in the Q&A, you talked about different components of where the backlog is going up. What's the overall increase in backlog and revenue?

You know, we don't keep it in those exact terms, Craig. In many respects, what I'm doing is trying to give you a snapshot of what we're hearing relative to our customers with respect to their backlog. So what I'm trying to do is give a good snapshot of where those customers are saying, we've got big work that's coming. This is what the work looks like compared to where it was last year. And that's why I call it out in particular backlog. Over 3 million tons that customers have articulated in the Mid-Atlantic Division, 15 million tons in the Southwest Division, over a million tons in the Midwest. And then I did talk to a degree about how much business has been booked in the Rocky Mountains this year versus last year. But I'd rather not go into specifics on revenue, et cetera. We'll talk about that as they play out during the course of the year. But I think these underlying trends give you a tremendous sense and vision of where the business is likely going.

And with those larger projects, have you locked in pricing? Is that part of your confidence in pricing?

I mean, typically on larger projects, what you will do is you will price on an annual basis. So you will go in, if it's a multi-year project, you will give prices per size per year, and then you will have escalators on those as well. So the answer is yes.

Okay, and then with the three large projects on the Gulf Coast that are underway, and you have two more coming, when do the next two come in, and? Should we be looking for volume to accelerate in Q1, given you have a really easy comparison?

Well, actually, what I had said was there are three along the gulf that have been awarded to Martin Marietta, and those are in our guidance. And what I had said was there were five more that have estimated start dates in 2019 that, in essence, we are in the running on. So, again, we haven't included any of those in our guidance or any of those in but what you might view as backlog or otherwise.

Okay, and the three that are awarded, when do they kick off?

I mean, the ones that are awarded are underway. So, again, they would be in the guidance that we have out there today for you, Craig.

Okay, great. All right, thanks a lot, guys.

Thank you, Craig.

Thank you. And our next question comes from Michael Wood of Numora Internet. Your line is now open.

Hi, this is Mason Marion on for Mike. Bluegrass pricing remains about 10% to 15% below your organic average. Are you working to close this gap, if possible at all, or is there some structural reason why this gap will persist?

Yeah, I guess I would say a couple of things, Mitch. If you look at bluegrass pricing in Georgia, probably relatively close to our heritage pricing in Georgia. If you look at bluegrass pricing in In Maryland, probably modestly below. If you look at bluegrass pricing heritage in Kentucky, it is below. So what we're doing is we're going across portfolio, giving you a snapshot of what it looks like when you blend it. Obviously, you can go back and look at the history that we had in earlier acquisitions. Clearly, we try to assure that we're getting good and appropriate value for our products. You saw that in the aftermath of TXI. So I'm trying to give you a sense of what our history has been on transactions like this and what the different geographies look like. I think that probably leads you to the conclusion that you'd like to work towards.

Okay, and then Resi was weak in 4Q. Did you see a rebound in January like some of the other Resi-focused companies that have reported already in any areas that are particularly weaker or stronger than others?

Yes. Well, I tell you what, I usually talk about the quarter that we're in right now when we come back and report, so I won't go into a lot of detail on that. The one thing that I will share with you, and you probably sent it as well, is certainly what I have heard from the homebuilders, is that they saw a pullback in Q4 when interest rates were more aggressive, but they have also said that they have seen a nice pickup since interest rates have stabilized, and they have a more stable view going forward. So, again, I think if we go back and look at those resi numbers that we spoke of a little while ago in looking specifically at the permits and where we sit relative to national averages, I like where we sit, and it sounds like the home builders are at least telling publicly the type of story that tends to work very well for Martin Marietta. Great. Thank you. Thank you.

Thank you. And our next question comes from Brent Thelman of DA Davidson. Your line is now open.

Great. Thank you. On the infrastructure side, Ward, has the Georgia market lived up to expectations in terms of new work hitting the street? I seem to remember that being an area of real promise, but I have seen some delays.

I think it's seen some delays, but we started to see much better activity, particularly in North Georgia last year. Remember that you've really got two different markets in Georgia. Market number one is Atlanta. Market number two is everything else. And I think what we're going to see this year is we're going to see a better market in the Atlanta marketplace, which we welcome because now we have a bigger footprint in the Atlanta marketplace. Also, South Georgia has been good and steady. The T-SPAS program that was put in place down there several years ago has been very attractive in parts of South Georgia, and the activity, particularly now that it's being driven from the ports and a wider Panama Canal, is helping that part of the state as well. So remember, Georgia's really Atlanta, then everything else, and then the other market that's Georgia, is Florida because, again, the granite in some respects, particularly in South Georgia that we're producing, finds its way into a very attractive Florida DOT market. So, again, if we come back and say what are the DOT states or states from a DOT perspective that are looking good, we would certainly put Georgia in that bucket. But we think places like Texas and Colorado and North Carolina aren't looking good. We think they're looking extraordinary.

Yeah. Okay. And then, Ward, I wanted to get your bigger picture thoughts just around diversification. And, you know, Texas has been around, call it a third of the business for a while. I know it's been a fantastic market over the years and probably will continue to be here over the next couple of years. But as you point out in the deck, that market is sort of beyond mid-cycle demand. And I'm just curious, Ward, if you think about Martin Marriott, a longer term, is that a percentage or portion of the company that you're still comfortable being in.

You know, but it's been an outsized percentage the last couple of years in large part because places that should have been a bigger percentage weren't at the normal percentages. So if you look at a place like North Carolina that's still considerably below midpoint and a place like Georgia that's considerably below midpoint and Maryland that's considerably below midpoint, as those states recover, Frankly, from a percentage perspective, it puts Texas in a much more normalized place. And number one, I think looking at it, as you say, bigger picture and in a more holistic fashion, I think that puts Texas in a better picture. The other thing that I would remind you is we're not all over Texas. I mean, our footprint in Texas is uniquely driven by by what's going on in that golden triangle where you've got just such a disproportionate amount of people there. It was interesting. We had a large meeting of our top 100 employees in Martin Marietta several years ago. And we had an economist who came in, and the economist was absolutely positive that Texas was going into a recession several years ago. And what I will tell you is all of our people who live and work and breathe in Texas, and that's a lot of them, by the way, looked at us and said, I don't know where he's coming from, but we don't see Texas going into a recession. We see that market the way that you do. We think it's very, very attractive. I agree it's beyond midpoint. But their population trends, their DOT budgets, and otherwise dictate that they should be there. So we do not see anything in Texas that in any respect feels overbuilt to us. So I think what I would tell you is we like our Texas position. And we like what we think is going to be a more return to normal for the Carolinas, Georgia, and Maryland. And we think that snapshot puts Texas in a very appropriate perspective. And I hope that was helpful, and I know that was long-winded, and I apologize.

Thanks for the kind of award. That's a must.

You're welcome.

Thank you. And our next question comes from Scott's Greer City. Your line is open. Hi. Good afternoon.

Good afternoon. I wanted to ask about West pricing. So we have this robust aggregates pricing in Colorado that you've been talking about, which is offset by mix in Texas. And I'm curious if you could talk a little bit about I don't know how specific you can get on the aggregate pricing environment in Texas, more on a like-for-like basis. It seems like even taking that into account, it's a market that's maybe not having quite the robust price increases as some of your other markets. And I understand it's a very strong market, as you've said many times, across the different end markets. But it's also above mid-cycle from a consumption perspective. There's a decent amount of supply there. I'm curious, with the amount of letting activity expected, the Gulf Coast work, everything, do you see possibility for better pricing in Texas, or is it a market that even with such robust demand, it's going to be more of a moderate pricing state?

You know, Buddy, if you go back over the last several years, I think Texas has had somewhere between really good pricing and good pricing. And, you know, in the spectrum of things, we'll take anything in that zip code. I think when you compare it to Colorado, one of the candid differences is barriers to do anything heavy side in Colorado really are very, very high. And I've commented to people before there are three large grant inquiries in Denver today, and in 30 years there are probably still going to be three large grant inquiries in Denver. And I think that drives some of the delta between the two. What I would say is this. I think Texas will continue to be an outsized performing market on volume. I think Texas pricing in the course of time continues to get better. And as I look at it, do I wish it was modestly higher? Sure, I think anybody would wish it was modestly higher. But I like the trends that we've had there. I like the leading position that we have there. You know how we tend to look at a market. And if I'm thinking about the top 10 things or top 50 things that I worry about, if it gives you any comfort, aggregate pricing in Texas is not on that top 50 worry list right now.

Great. That's a helpful answer. And then my follow-up, I guess one for Jim. I wanted to talk a little bit about how you're thinking about free cash flow conversion. And I know earlier in the call, you know, Ward said you have a business that throws off a lot of free cash. If I'm thinking about roughly $1.23 billion of EBITDA, the CapEx, the tax, the interest, and historically maybe you've been around that 25% to 35% free cash flow conversion. So... Do you think for 2019, given all your guidance, are we in the $400 million range for free cash flow? Or if I'm thinking about working capital and other things, is it possible to get up to $500 million? Just trying to think about how to bracket free cash flow and what you're thinking from that perspective.

Yeah, I think your more optimistic assumption is probably more accurate. We're going to be doing pretty good. 2019, we should have higher cash flow conversion, close to where you came out at.

Great. That's really good to hear. Thanks a lot, guys. Best of luck.

Scott, thank you. As I said, we've been an embarrassment of riches when it comes to free cash flows, and we'll take that problem. It's a high-class one. I want to thank you all for joining our fourth quarter and full year 2018 earnings conference call. Our steadfast focus on safety, efficiency, and operational excellence positions Martin Marietta to deliver continued growth, success, and superior shareholder value creation. We believe 2019 will be another record year for Martin Marietta, and we look forward to discussing our first quarter 2019 results with you in April. As always, we're available for any follow-up questions. Thank you for your time and your continued support of Martin Marietta.

Ladies and gentlemen, thank you for participating in today's conference. This concludes today's program. You may all disconnect. Everyone have a great day.