Martin Marietta Materials, Inc.

Good morning, ladies and gentlemen, and welcome to Martin Marietta's Third Quarter 2020 Earnings Conference Call. My name is Dallin, and I'll be today's coordinator. All participants are currently in a listen-only mode. A question and a suggestion 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 Offert, Martin Marietta's Vice President of Vestal Relations. Suzanne, you may begin.

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 Nicholas, Senior Vice President and Chief Financial Officer. As a reminder, today's discussion may include forward-looking statements, as defined by United States securities laws in connection with future events, future operating results, or financial performance. Like other businesses, Martin Marietta is subject to risks and uncertainties, that could cause actual results to differ materially. Except as legally required, we undertake no obligation to publicly update or revise any forward-looking statements, whether resulting from new information, future developments, or otherwise. Please refer to the legal disclaimers contained in today's earnings release and other filings with the Securities and Exchange Commission, which are available on both our own and the SEC websites. We have made available during this webcast and on the investor relations 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 FCC filings. Effective July 1, in connection with us 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 Nicholas 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.

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 Murrieta's history with a company-wide loss time and total entry incident rates exceeding world-class levels. For the third quarter, increased pricing across all product lines and disciplined cost management helped 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 87 cents 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 have taken to adjust the company's cost profile. Now, for a review of our third quarter operating performance, aggregate 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, aggregate shipments to both the infrastructure and non-residential markets declined. Shipments to the residential market improved modestly. Aggregates average selling price increased 2.7 percent or 4 percent on a mixed adjusted basis, underscoring this product line's resilient pricing power. By region, the East Group posted a 4.4 percent 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 price 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%. Underlined 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 percent, reflecting continued energy sector headwinds. Reported cement pricing increased 1 percent, while average selling prices for our core cement products, namely Type I and Type II cement, were up $4 over the prior year period Lower shipments of oil well and lightweight specialty cements found for West Texas disproportionately impacted overall pricing growth. As a reminder, specialty cements can sell for over $200 per ton. On a mixed suggested 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 fulfillment center. Favorable geographic mix from robust Colorado shipments was the primary driver of the 2% increase in third quarter concrete pricing. 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?

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 points to 36.4%, an all-time record, despite lower shipment volumes. Strong mix-adjusted pricing gains, disciplined cost management, and lower diesel fuel costs contributed the 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 costs and prior year kiln investments that have improved reliability and throughput. For our downstream businesses, Ready Mix concrete product gross margin declined 90 basis points to 9.7%, attributable to higher costs for raw materials. Asphalt and paving achieved record gross profit of $32 million in a 140 basis point improvement margin, despite lower revenues. Magnesia specialty third quarter product revenues decreased 7% to $55 million. reflecting lower demand for chemicals and line products. Lower revenues and reduced fixed cost absorption resulted in a 240 basis point decline in product gross margin to 38%. Our consolidated results included $70 million of gains on surplus non-core land sales and divested assets. These gains, which were recorded in other operating income nets, 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're seeing 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 Miriam'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 $70 million of 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, improving organic capital investment, and a consistent return of capital to shareholders while maintaining our investment grade credit rating profile. In August, we acquired an aggregate and ready mix concrete company in the Dallas-Fort Worth Metroplex. These acquired operations complement our existing geographic footprint and expand our customer base. They also enhance our aggregate and cement throughput to drive incremental upstream value. We have widened our four-year capital expenditures guidance and now expect it to range from $350 to $400 million. We are exploring additional like-kind exchange opportunities that would defer the taxes we would have otherwise paid 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 and meaningful, sustainable dividends. 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 remained temporarily paused during the quarter. However, repurchases can resume at management's discretion. With a debt to EBITDA ratio of two 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 strengths with $1.2 billion of total liquidity, with our low leverage and ample liquidity to 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. 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 data 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 seasons. 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 underdeveloped 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-urbanization. We believe these trends bode well for a more aggregates-intensive construction cycle than experienced 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 pandemic's onset. For example, Texas DOT's scheduled lettings for fiscal year 2021, which began September 1st, are currently planned at $10 billion, an increase of 35 percent 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 resumed 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 that included a one-year extension of 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 bills provide the first sizable increase in federal transportation funding in more than 15 years. Regardless of the upcoming election outcomes, increased infrastructure investment should provide volume stability and drive aggregate 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 remain challenged in the near term, COVID-19 is driving a paradigm shift that should promote more diverse non-residential demand than 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 light 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 to the non-residential market accounted for 33 percent of third-quarter shipments. Single-family housing is expected to lead this economic recovery as deurbanization accelerates. Prospective homebuyers are increasingly moving from large metropolitan cities to smaller metro or suburban areas amid 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 residents opting to move farther out from city centers. Across our southeastern and southwestern footprint, Underbuilt 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 aggregate's intensity of multifamily 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. Milton 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're 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.

Thank you. To ask a question, you will need to press star 1 on your telephone. To withdraw your question, press the pound key. We ask that you please limit yourself to one question and a quick follow-up to allow time for everyone to queue. Please stand by while we compile the Q&A roster. Our first question comes from Trey Grooms with Stevens. Your line is now open.

Trey, good morning. Are you there? Oh, sorry, I was on mute. Sorry about that. But you were probably having a bland conversation.

Oh, yeah. Sorry about that. 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, you know, one of your points, highest-priced, highest-market state, North Carolina, is pretty challenged. So, you know, pretty strong there. And so, Ward, could you update us on, you know, maybe some of the cost tailwinds that you're seeing in the aggregates business? You know, clearly diesel, but it seems like there's, you know, much more at work here. You know, and how do you think about the sustainability?

Trey, thanks for the question. I know you're entirely right to put up these numbers. But as you said, North Carolina is not at the peak of its game right now. We think it's going to be back to normal, by the way, at half year next year. But what we've done in this very impressive quarter is done it with about an arm and a half tied behind our back because North Carolina is down, but it's not going to stay down. And Magnesia Specialties is going through a difficult moment right now, but it's not going to stay down either. So what you're seeing is really a two-fold impact trade. One, pricing was very good, and that's something that we've come to expect and you've come to expect, as have our shareholders. So there are no surprises there. It's nice to see it performing in a resilient fashion, again, when you're close 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 Mark Marietta. You can see it also in the SG&A numbers. But if I go through and look at where were we, not just in energy, but where were we relative to contract services, repairs, supplies, and other plant costs all down. And that's exactly what we would anticipate. As you recall, Trey, as we've gone through cycles, we tend to invest very carefully in our company. And when we were going through the financial crisis and the Great Recession, we did pull back on CapEx. At the same time, 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 that is 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'm so grateful for this team on is continuing to show their agility in 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 a pandemic.

All right. 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 2021. 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 your messaging there?

Another great question. I would say several things. I would think in the back half it should certainly be pointing toward 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 two next year we are seeing growth. Keep in mind, quarter one is really a rather inconsequential quarter. There's very little volume that goes in Q1. The season really begins in earnest for business like ours in May because that's when you'll have everything open across an enterprise, including those parts of the country that tend to be more weather affected. So would I say on a comparative basis Q1 would be a tough compare? Yeah, 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 de-urbanization trends that we're seeing will help us nicely on housing. I think Mark 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 Bandlines 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 impact states, it matters. I think that's something that's real and we're going to watch as 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 at half year. So if we look back at even where TxDOT said they were going to be at half year as they were thinking about 2021, you know, they were at $7.5 billion. 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'll 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're bidding on, wait for it, six different Amazon fulfillment centers just in that marketplace. So as 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. I do think hospitality is going to be challenged for a while. I think varying 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 continue 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 home builders buying more land. we're going to see them entitling that land. And we're going to see the drag along effect, probably not in 21, but probably more going into 22 of the light portion of non-res. So what I've tried to do, Trey, in response to your question is go through those three primary end uses 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 and get the more precise guidance, we'll get much more granularity to that. But Again, my commentary is saying that this October compared to last October looks pretty good. We like that as a data point.

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

Trey, thank you very much. It means a lot to us.

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

Hi, thank you for taking my questions today. First, focusing on the cement segment, could you give more color on the backlogs for this segment, particularly as we look over the next 12 months? And what does this mean for a pricing environment, given it was, let's say, an unusual year this year for pricing?

No, look, you're right. It's been an unusual year, but at the same time, what I'd say, Catherine, is pricing, if we're really looking same on same, 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 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 on some property that we sold them. So, again, the backlog situation looks quite good there. And actually, the pricing was pretty good, Catherine. If you look at it, the optics of 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, We're down 74% in West Texas. So big percentage, but small tons. But the reason that's so important, and we called it out in the prepared comments, that's where that cement sells for 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 mixed effect on it, what does 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 part of what I would call out for you is volume is down, but the cement EBITDA on 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 cost, but we're doing it the other way on pricing as well. But again, backlog's up 23% or a little bit over 270,000 tons.

Okay, perfect. And then the follow-up question is more on the infrastructure side, particularly with state DOTs. You have confirmed that, and our work also shows that the worst appears to be behind for North Carolina. Could you just kind of 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.

Sure. Happy to. A couple of things. One, Texas, I'll just go through them in order of revenues. So Texas has huge FY 2021 weddings of $10.2 billion. We spoke about that just a minute ago. That's going to have a multi-year benefit to Mark 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 remember is Prop 7 funding is currently projected at a full $2.5 billion. Even as we're looking at Prop 1, that's looking at $620 million. And keep in mind, none of that anticipates Texas having to tap into their $10 billion rainy day fund. So, again, TxDOT feels very healthy, even compared to where we were at half a year. looks pretty flattish, and that's what we're 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 billion dollars 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 now is sending out some AA-rated bonds. They were just rated last week. It's going to be $700 million to build North Carolina bonds. And importantly, the state has started or restarted lettings and anticipates about $1.3 billion of FY21 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 their 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 toll activity in Florida. So, again, if we look at our top five states, and that's exactly what I'm just taking you through from an infrastructure perspective year over year, we like the looks of that.

Great. Thank you very much.

Thank you, Catherine.

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

Hey, good morning, guys. Yes, Paul Roger. Yes, can you just say a bit, 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 highways 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?

Paul, thanks for the question. It's good to hear your voice. Yes, I would say that we're one of the few industries that probably can't lose next week, and here's what I mean by that. If the president is reelected, we anticipate there's going to be a new highway bill, and we think it's probably going to be very similar to the Senate's number. That's 28% over FAST Act, and that would be the largest increase all by itself in 15 years. Similarly, if we should have a change in party in 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 reelected, 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 in that is we actually do pretty well with regulation. We've got great teams. They're very sophisticated. They can deal with that very efficiently. So I believe either way, Martin Marietta will be well positioned. If there's more regulation, one of the things that we certainly see that drive in the past is perhaps more M&A opportunity as well, because oftentimes if you're looking at a higher tax, higher regulatory environment, closely held family 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.

That's very clear. And it was interesting in your opening remarks. I mean, you inferred that this would have obviously been a fantastic year were it not for COVID. If you see a situation where we do get some volume growth again in 2021, Are you basically suggesting there's a lot further you can go on the margins, and I guess particularly if some of the more profitable markets like the Carolinas stabilize or grow?

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 like to be able to 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 costs extraordinarily well. Again, I think geography from a mixed perspective actually this quarter was not particularly our friend. 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 significant project delays and we saw extremely wet weather in what was formerly the mid-Atlantic division. And again, we discussed the fact that we saw lower NCDOT funding that's going to be remedied. And we saw less wind farm activity. So if we look at what 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 a mechanism for us 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 than not going forward. And I think this is the type of cost performance that you should expect us to continue to deliver.

So encouraging. Thank you very much. Thank you.

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

Yes, hi. Good morning, everyone.

Jerry, good morning.

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

No, you did, Jerry. And I guess what I would say is that I'm not sure that 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 Mark Marietta. When volumes go up, pricing goes up. When volumes go down, pricing still goes up. And this quarter I thought was a pretty good one because there are not a lot of industries that could come forward with volume down nine 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 good price trajectory in large part because we're in really good locations. I think as we continue to see single-family 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 builder because at the end of the day, there's so many things they care deeply about in the home, but the newsflash 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 a practical matter, coming in 22, but we see a very healthy residential market, and then we see the drag along in the course of time of the light non-res, I think all of that pertains 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 in a pretty healthy spot.

And so 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 what you're announcing to customers is more like the pricing we saw in 20 than what I'm describing.

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's nothing in our pricing model that we feel like has been shaken by this strange, strange time that we're all navigating together.

Okay. I appreciate the discussion. Thanks. Thank you, Jerry.

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

Good morning. Mort, on the decision to reestablish 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, you know, one quarter left in the year? I'm just wondering if you could talk, kind of walk us through the decision-making process and what you saw specifically that made you comfortable with reestablishing the guidance.

Yeah, Anthony, thank you for the question. I think part of it is you get deep enough into something that's strange and you start to figure it out a little bit. So I think candidly that's part of it. The other part of it is, Anthony, there's 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 winter really set in 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 tried to bracket what we think Q4 can look 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 abuses, we're trying to give as realistic a look into 21 as we can. But again, we feel pretty good about all of it.

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 it fairly stable or did it ease? Maybe you saw some more projects come back than you expected or any kind of general thoughts there?

Yeah, 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 and the Great Recession, we saw projects canceled. That's not what we're seeing. So I want to call that. The other is, in some instances, we simply saw weather deferrals. 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 something to 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 patient, a normal sinus rhythm, that certainly feels better to us. So 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 were 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 will tell you gratified is probably the right word. But, again, we expect to see more of that going into the future, not less of it.

Okay. That's very helpful. I'll turn it over. Thanks, Anthony.

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

Hey, good morning, everybody. Thank you for taking the question. Ward, when you're talking 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'm 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-led on the residential recovery into next year?

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 that 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 that 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, as we're really looking at coming out of the financial crisis, fell to about 70% of starts versus what had typically been closer to 80%. So if we're seeing it move back to more of a normalized portion of what we would expect single family to be, particularly as we're looking at these deorganization trends and as 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 will be growing out, not states that will be growing up. And places that are growing out, tend to be more aggregates intensive. So, yes, I think home 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 will not end up being significant, to use your word, I think it's a good one, a governor on what housing growth is going to look like. Great.

And then switching gears, you know, Think about kind of the leverage range that you guys have talked about operating in the past. I mean, you're kind of there right now. Barring any sort of thing on the CapEx side, it should be another good year of cash flow. 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? I'm just curious how you're thinking about the capital deployment into next year.

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'll be odd. For example, if we do see a wider blue streak go through the United States and we see a higher regulatory regime come in, as I indicated earlier, we have certainly seen that as something that 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 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 of 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 fight space and we have a lot of regulatory ability from a Hart-Scott-Rodino perspective, and I think our teams have proven that they're very good at, one, identifying transactions, number two, going through the process of memorializing it, and then upon closing, pulling the synergies out of it as well. So we're going to find good uses for that cash, whether it's investing in Martin Marietta, returning it to shareholders, or finding the right deal. But you know how we rank those in order, Stanley.

Perfect. Thanks so much for your time. Good luck. Thank you.

Thanks, Stanley.

Our next question comes from Garrett Schmois with Leap Capital. Your line is open.

Thanks for taking my question. 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? Absolutely, Stanley.

Stanley, as you'll recall, historically, non-res would have been around 30% of our business. And 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 Rockies. 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've come out of the river, as we have focused our business increasingly on these large commerce corridors, we feel like 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 85 corridor, or the 95 corridor, has really helped move that. And if you think about those corridors, 95 was significantly changed by bluegrass. 85 was significantly changed by what we did with the assets that we acquired in Atlanta. 35 was significantly changed by what we did with TXI, and 25 was completely remade with what we did in the River for the Rockies 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 reauthorizations that, unlike next year, has not gone up in value over the last 15 years.

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 give me the color you provided on the October growth. I mean, what do you think is driving the increase? Is it project timing, catch up from, you know, 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 range?

Yeah, I think several things probably. We don't have some things going on this year that we had going on last year. There were actually varying degrees of headwinds last year. So if you go back to it, Garrett, part of what you'll see is we did have some increased grading last year. We're stripping at the quarries. We did accelerate some maintenance at our Hunter cement plant. Our Granite Canyon quarry, which sits in southern Wyoming, which feeds that very vibrant northern Colorado market, was later coming on last year than we would have hoped. And then Hurricane Dorian sat over Freeport, Bahamas last year a little bit longer than we would have wished. So number one, they actually put some headwinds in Q4 last year, and we're thinking we'll probably pass 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 gigafactory on that property that we sold them. That certainly adds 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 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.

It is. Thank you. Thanks very much.

You're welcome, Garrett.

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

Hey, Ward. Good morning and congrats on a strong quarter.

Thank you, Phil.

If we think of some of the policy optionality going into next year, if we get a stimulus package, this is separate from a longer-term authorization bill, 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 in 2021? I know typically it's like a year plus lag.

Yeah, I think they can. Because part of what's happened, Bill, 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, they're designed, right away has been purchased, and they're in a position that they want to go that they can. And I think that's a very fundamentally different place. So to your point, if there's a phase four or if there's anything else, and there's simply, as you know, AASHTO has long been advocating for about $37 billion that they feel like should go directly to states to help fill the hole that was created because gas tax revenues weren't there. Now, keep in mind, Early in the year, they said that hole was 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 it today? Absolutely. It's why they're floating $400 million worth of bonds. Could TxDOT do the same thing, to be sure? And could Colorado do the same thing? Absolutely. Because, again, if you look at that state, they're metering out their bonding activity over time, and that could 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 is 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 a 21 event.

Got it. That's super helpful, Ward. And I think the margins in the quarter are certainly really impressive in light of 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 in 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?

Yeah, look, we'll obviously give you some really good guidance on that in February, but I think part of what we're trying to outline, Phil, is this was a really impressive quarter with volumes down almost double digits and our most profitable business with its arm tied behind its back. Okay. Again, our back roads, 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 feel increasingly good about that. If the eastern business gets some momentum going into 21, even in the back half, Phil, that's where your story would be. Okay.

Thanks a lot, Ward. Appreciate the call.

Thank you much.

Our next question comes from Selden Clark with Deutsche Bank. Your line is open.

Hey, thanks for squeezing me in. I guess just based on where October is trending right now and, you know, obviously weather can, you know, throw a wrench into this, but just based on where October is trending and how you're positioned, you know, from a non-resi perspective and the improvement that you're talking to in regards to the outlet 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?

That wouldn't surprise me. And again, we'll come out with more granular information in February. But if we think about it, 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 to you percentages in Q1 don't mean a lot because the tonnage is so slow. So it would not surprise me that this on a percentage down, unless we see things just change dramatically, it would not surprise me that this would be your single steepest climb, to use your words.

Okay, that's helpful. And then you gave some context around, you know, aggregates potentially going from 38 to 45% of shipments with, you know, one of these highway bills. But I guess just, can you just help us understand sort of the relationship between, you know, a 28% or 45% increase in annual spending on, you know, coming from the government and and how that relates to your actual product demand if we go back and look at some of these historical highway bills. It's not going to be 28% gross. How do you think about that?

I guess the way that we think of it, if we look at the states in which we see significant population trends, and really that's going to be our top five states, where there will be capacity needs and capacity issues. So if you take that Georgia mobility program and think about that in more than just an Atlanta context. And you think about Atlanta, but you think also about Columbia, South Carolina, and Jacksonville, Florida, and Orlando, and Raleigh, and Charlotte. And then you start looking at lane miles added. That's your single most aggregate intensive undertaking because several things happen in 7-1-1. It's taking a lot of tonnage, but it's taking a lot of varied tonnage as well. So you're putting base products down. You're eventually putting clean stone in either asphalt or concrete, and that's going down. So you're taking an entire array 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, hone it in some degree, and produce less base and more clean stone? Sort of, kind of. But, I mean, it's not a science in doing that because it's not that easy. But it's a practical matter if you've got a wider array of products going out that would tend 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 standpoint, And what it does from an inventory efficiency is incredibly helpful. And part of what 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 material that we can deliver, and we think in these states in which we're operating, as they add needed capacity, it adds tonnage and it adds efficiency. I hope that helps.

Yeah, that is helpful. Thank you.

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

Good morning, everyone, or good afternoon now, I guess. Congratulations on a great quarter, Ward. Thanks, David, very much. Thank you. So I guess a lot's been covered here in the past hour or so, so I'll just make a couple of quick ones. I guess in ReadyMix, 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 into play here? No, I would say several things.

One, we saw a good price in Colorado, and we saw some mixed shifts in Texas a little bit. So I think that's largely what you're seeing. 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, you know, 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, you know, 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 ReadyMix right now. But in large measure, it helps undergird a very attractive upstream business. So it's doing exactly what we would have thought.

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 of just what's happening in energy, or are you seeing congestion or any reduced level of service in rail?

Well, the service in 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 even closer to the water. And that was really a piece of the mixed issues in the southwest, Because if we have 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 a Houston metro per se issue, because there's 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, Dave, actually cement is modestly lower priced in San Antonio than it is in Dallas. and things that are going to the Grand Parkway are really coming out of our hunter facilities. So we're not seeing bad activity in Houston whatsoever. It was really more coastal-oriented on that commentary.

Great. Thanks very much. Thank you, David.

See you.

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

Good afternoon, gentlemen. Suzanne.

Hi, Michael.

Ward, we appreciate the insight on some of your top important states, but maybe you can highlight or call out a couple in the second five 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, the volume expectations as some of these macro events impact second half of 2021 and 2022.

Look, I'll certainly try. I mean, if we're looking at South Carolina, they've got a FY 2021 program of about $1.8 billion. That's up about 15%, so we like what we're seeing there. Remember, South Carolina did something the other year that was very un-South Carolina of them, and that is they raised the gas tax. So they're taking that up incrementally over a period of six years. We're about halfway through that, so we're seeing good activity there. Part of what we're really hardened by is Kansas 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 Kansas 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, or 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've equally done very well in 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 at places 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 southern Ohio. Kentucky DOT has not had its finest moment this year. And I think equally you've heard that from others as they've gone through. I think you would have heard a bit of that from Summit and Anne's commentary earlier in the week as well. But if we're looking at places like Maryland and we're looking at Virginia and Iowa and Nebraska, and as we've gone through those, just to 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 look at Maryland, Virginia, Iowa, we're Nebraska right now. Again, Maryland has a very significant P3 program, and the other states just tend to be very solid states. Remember, Iowans consume, on average, more stone per capita than any place else because they go through a hard freeze 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 two and phases three and sometimes phases four of that. That's actually been quite good. The one area in the Midwest that has been more challenging this year has been what's not happened relative to wind energy. And we called 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.

Ward, it certainly was. And I was intriguing about the factoid on Iowa. I was not aware of that. Thank you. Sure.

That's what we're here for.

Take care, Michael. Thank you.

Thank you. Our next question comes from Adam Thalamer with Thompson Davis. Your line is now open.

Hey, nice quarter, guys.

Thank you, Adam.

Hey, can I ask a quick question, and then I'll turn it over? But I wanted to ask on ReadyMix, if you could comment on the backlogs in ReadyMix and also the outlook for pricing, Warden.

No, happy to. I mean, it's interesting. The outlook on pricing is always a little bit more challenging, at least in half of it. Outlook on pricing in Colorado tends to be very attractive. Outlook on pricing in Texas continues to look pretty steady. I will tell you, as we look at backlogs year over year, they're up 3%. And, you know, if you're looking at a very dynamic market, I like the way that that looks. So... Again, part of what we've done in Texas in particular, Adam, is we've moved a certain degree of our volume in Texas from infrastructure in some instances to housing. And I'll tell you very candidly why we did it. We wanted to have it and a little bit more of it in housing one because housing looked good. And two, housing does not tend to be as weather-sensitive as infrastructure is. Now, that said, housing tends to have a little bit lower ASP. 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.

Okay, perfect. Thanks, Ward.

Thank you, Adam. Thank you.

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

Hi, Ward. Good talking to you. Thank you for taking my question. I wanted just to ask on, you have mentioned in the past that 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?

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 looked like that were not in our top five. And I spoke specifically to Maryland. And 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. They were in the western part of the state. And most of what we acquired with bluegrass that was in Maryland 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're getting the right value for a product that we're making that meets state and federal specifications and that we think is not easy to do. And keeping in mind that on the infrastructure side, stone is about 10% of the cost of building a road. On the housing side, it's about 2% of the cost of a home. And if we look in non-residential, it's somewhere between those two numbers. In other words, our product is never going to be what's going to make or break whether the project goes or not. Equally, our product isn't going to make or break whether that contractor is typically low or not. But at the same time, to do what we do with the skill 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 stone out of the ground, we've got a century worth of 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 requirements 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 price is, 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.

Understood. Thank you.

Thank you, Adrian. And thank you all for joining our third quarter 2020 earnings conference call. Moving forward, we're confident in Mark 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 four-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. You may now disconnect.