Q1 2021 Martin Marietta Materials Inc Earnings Call

Ladies and gentlemen, please money you lie on your program will begin in approximately two minutes again. Please many of your line. Your program will begin in approximately two minutes. Thank you for holding and please continue to standby.

[music].

Good morning, ladies and gentlemen, and welcome to Martin Marietta's first quarter 2021 earnings Conference call. All participants are now in a listen only.

Mode.

<unk> and answer session will follow the company's prepared remarks as a reminder, today's call is being recorded and will be available for replay on the company's website I will now turn the call over to your host Ms. Suzanne Osberg Martin Marietta as Vice President of Investor Relations Suzanne you may begin.

Good morning, and thank you for joining Martin Marietta's first quarter 2021 earnings call with me today are ward Nye, Chairman and Chief Executive Officer, and Jim Nickolas, Senior Vice President and Chief Financial Officer.

As a reminder, today's discussion may include forward looking statements as defined by United States Securities laws in connection with future events future operating results or financial performance.

The other businesses Martin Marietta is subject to risks and uncertainties that could cause actual results to differ materially.

Except as legally required we undertake no obligation to publicly update or revise any forward looking statements, whether resulting from new information future developments or otherwise. Please refer to the legal disclaimers contained in today's earnings release and other filings with the Securities and Exchange Commission, which are available on both our own.

And the SEC website.

We've made available during this webcast and on the Investor Relations section of our website Q1, 2021 supplemental information that summarizes our financial results and trends. In addition, any non-GAAP measures disclosed today are defined and reconciled to the most directly comparable GAAP measure in our earn.

<unk> release and SEC filings.

And I will begin today's earnings call with a discussion of our first quarter operating performance and market trends as well as our recently completed acquisition of Taylor Corporation.

Jim Nickolas will then review our financial results after which ward will provide some brief concluding remarks, a question and answer session will follow.

I'll now turn the call over to ward.

Thank you Suzanne and thank you all for joining today's teleconference.

Evidenced by our first quarter results and successful targeted growth initiatives. It is cleared then Martin Marietta is off to an impressive start in 2021.

The company has differentiated business model and proven strategic operating analysis and review plan, what we referred to ensure we remain well positioned for continued success as we look to the remainder of 2021 and beyond we expect to build on our track record of strong financial operational integrative and safety.

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Supported by our team's steadfast commitment to safe and efficient operations price discipline and operational excellence, we established first quarter records for revenues profits and safety.

Building materials, and magnesia specialties benefited from strengthening product demand.

Specifically consolidated products and services revenues increased 3% to $922 million.

<unk> gross profit increased to 23% to $175 million.

Adjusted EBITDA increased 37% to $204 million and diluted earnings per share grew over two and a half times to one dollar enforced.

We also achieved the best first quarter safety performance in Martin Marietta as history with companywide lost time, and total injury incident rates exceeding we're trending at world class levels.

At the same time, we're thoughtfully executing on our sewer growth priority is to enhance our geographic footprint and grow our business.

As announced in this morning's release, we successfully completed the acquisition of Pillar Corporation, the leading aggregates and hot mix asphalt supplier in the Minneapolis, St. Paul region, and welcomed more than 200 talented employees to the Martin Marietta team.

Pillar provides an upstream materials platform and one of the largest and fastest growing metropolitan areas from the Midwest and expands and complements the product offerings of our existing operations and surrounding markets.

Chillers cultural fit attractive margins and value over volume operating philosophy.

Correct me, along with our Central Division operations, we expect a seamless and successful integration.

Now, let's turn to the Companys first quarter operating performance the building materials business saw strengthening product demand from single family housing growth infrastructure investment and notable heavy industrial projects of scale in our key geographies.

Our aggregates cement and ready mix concrete business in Texas, our largest revenue generating state experienced temporary disruptions from February historic Winter ice storm in sub freezing temperatures. Additionally, our aggregates and downstream operations in Colorado, Our second largest state by revenues face to.

<unk> comparison as our results from the same period last year benefited from unseasonably favorable weather conditions in the Rocky Mountains.

Overall aggregates shipments declined 3% in line with our expectations given return to typical first quarter seasonality factors and from largely non COVID-19 impacted prior year quarter.

Notably Eastgroup aggregates shipments increased as the Carolinas, Georgia, Florida, and Maryland benefited from strong residential and heavy industrial and nonresidential activity.

This growth offset lower shipments in the Midwest from more seasonal construction activity and reduced wind energy projects, while underlying product demand remains robust.

Unfavorable winter weather conditions in both Texas, and Colorado, and a softer energy sector market resulted in an 8% decline in West group shipments.

Aggregates average selling price increased three 4% or two 5% on a mix adjusted basis.

These pricing gains supported by our locally driven pricing strategy highlight contracted competence and underlying construction activity in the attractive markets that we serve.

<unk> pricing increased 4% with both east and central divisions contributing solid growth.

Your graphic mix from a lower percentage of higher priced long haul shipments limited the west group's pricing gain to 2%.

Our cement business delivered strong first quarter operating performance and shipment growth. Despite the disruptions from February as historic High storm I'm extremely grateful to our teams. There are actions to proactively went awry and take our plants offline allowed us to quickly return to normal production capacity post storm.

To that effect, our cement operations established an all time record from monthly shipments in March demonstrating the robust demand and construction activity throughout the Texas triangle.

Mix adjusted price and grew 2% during the quarter annual cement prices went into effect April one and have garnered widespread support in both north and South Texas, We expect our cement business will continue to benefit from favorable market trends supported by continued market tightness in Texas and <unk>.

<unk> customer backlogs.

Turning to our targeted downstream businesses, our ready mix concrete operations established a first quarter record for shipments, which increased nearly 27% to 2 million cubic yards.

Large non residential projects and incremental volume from operations acquired late last year contributed to double digit shipment growth in Texas, which more than offset weather related shipment declines in Colorado.

Concrete pricing declined 2%, reflecting geographic mix from a higher percentage of lower priced Texas shipments.

Our Colorado asphalt and paving business lost production days from a return to more typical winter weather conditions versus the prior year period, resulting in reduced asphalt shipments asphalt pricing, however improved 8%.

Colorado market fundamentals remain strong supported by healthy bidding activity and overall customer optimism.

Looking ahead, we remain confident in Martin Marietta as attractive market fundamentals and accelerating long term secular trends across our three primary end use markets will drive sustainable construction led aggregates intensive growth for the foreseeable future.

We are encouraged by the recent initial bold steps to advance much needed infrastructure investment and a general consensus for successor legislation to the fixing America's surface transportation or fast act in the coming months.

With both congressional chambers working on their own reauthorization proposals, we're optimistic that a fast act replacement and increased funding levels will be passed before its expiration in September generating meaningful shipment benefits in 2022 and beyond.

In the meantime state and local infrastructure funding remains resilient.

Estimated fiscal 2021 Lettings for our top five state departments of transportation or <unk> are currently above or near prior year levels keep in mind, our top five states, Texas, Colorado, North Carolina, Georgia, and Florida are disproportionately important to our business representing <unk>.

91% of total revenues for 2020 building materials business for reference aggregates shipments to the infrastructure market accounted for 30% of first quarter shipments well below our 10 year historical average of 43%.

Non residential construction continues to benefit from increased investment in aggregates intensive heavy industrial warehouses and data centers broadly offsetting weakness in the more COVID-19 impacted light commercial and retail sectors light nonresidential activity should benefit from the attractive drag along effects.

Of strong single family residential growth in the longer term in some regions. We're now seeing early signs of that recovery.

Aggregates shipments to the non residential market accounted for 37% of first quarter shipments.

Okay.

Martin Marietta is leading southeastern and southwestern footprint positions our company to benefit from single family housing growth given under build conditions favorable population and employment dynamics land availability mild climates and lower cost of living in these regions Importantly single family housing is two to three.

Times more aggregates intensive than multifamily construction, given the ancillary nonresidential and infrastructure needs to build out new suburban communities aggregates.

Aggregates to the residential market accounted for 27% of first quarter shipments.

Now I'll turn the call over to Jim to discuss more specifically, our first quarter financial results Jim.

Thank you ward and good morning to everyone.

We achieved the highest first quarter adjusted EBIT margin in Martin Marietta history, surpassing the previous record set in the first quarter of 2007.

The building materials business established first quarter records for revenues and profitability.

Products and services revenues increased 3% to $857 million, while our gross profit increased 25% to $148 million.

We continue to drive sustainable and best in class aggregates unit profitability growth through the combination of price discipline and operational excellence.

For the quarter aggregates gross profit per ton shipped improved 34% to $3 28.

And product gross margin expanded 490 basis points to 21, 3% despite lower shipment volumes.

In addition to the pricing gains lower contract services and internal freight costs contributed to these improvements.

Our cement operations benefited from a 3% top line improvement.

However.

And it killed downtime reduced production levels in nearly $7 million incremental energy and other costs all directly due to February Texas deep freeze led to a 1160 basis point degradation in product gross margin.

While these weather disruptions were headwinds to our first quarter results.

Our cement business is well positioned to benefit from growing demand and tight supply and remains on track to achieve its full year guidance.

Ready mixed concrete product gross margin improved 520 basis points to eight 3%.

Driven by double digit shipment growth and lower delivery and raw material costs.

Magnesia specialties continued to benefit from improving domestic steel production and global demand for Magnesia chemical products.

Generating product revenues of $65 million, a 9% increase.

Higher shipment and production levels combined with ongoing cost management resulted in product gross margin of 43, 5%, which matched the first quarter record established in the prior year.

Now I'll look at our cash generation and capital allocation.

The first quarter was a record for cash generation.

Operating cash flows of $192 million increased 80% driven by earnings growth and a reduction in working capital.

We continue to balance our disciplined capital allocation priorities to responsibly grow our business, while maintaining a healthy balance sheet and financial flexibility.

Our priorities remain focused on value enhancing acquisitions.

Prudent organic capital investment and the consistent return of capital to shareholders, all while maintaining our investment grade credit rating profile.

We continue to prioritize high return capital projects focused on growing sales and increasing efficiency to drive margin expansion.

Full year capital expenditures are expected to range from $425 million to $475 million.

Additionally, since our repurchase authorization announcement in February 2015.

We've returned nearly $1 9 billion to shareholders through a combination of meaningful and sustainable dividend as well as share repurchases.

Our first quarter earnings and cash generation were both records.

As a result, our debt to EBITDA ratio stood at one eight times as of March 31.

Lately below our target leverage range of two to two five times.

As were highlighted our disciplined execution of soar 2025 is underway.

Last week, we completed the Taylor acquisition.

We expect this acquisition to be immediately accretive to earnings and cash flow and contribute $170 million of product revenues and $60 million of adjusted EBITDA and the remaining eight months of 2021.

We financed the transaction using a combination of cash on our balance sheet and drawing on our accounts receivable credit facility.

Our full year 2021 guidance remained unchanged from the guidance provided in February and excludes the expected contribution of the Taylor acquisition.

That said, we will revisit our 2021 guidance when we report our half year results.

With that I will turn the call back over to ward.

Thanks, Jim to conclude we are extremely proud of our record first quarter results and industry, leading safety performance.

Martin Marietta is well positioned to capitalize on emerging growth trends that are expected to support sustainable construction activity both in the near and long term as we sort to a sustainable future. We will continue to build on the foundation that has proven so successful in aggregates led growth platform and unwavering commitment.

Disciplined pricing operational excellence and safety and solid execution of our proven strategy.

We're confident in Martin Marietta as outlook for the balance of 2021, and our ability to continue delivering sustainable growth and superior shareholder value creation in 2021 and beyond.

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

Thank you Sir as a reminder to ask a question you will need to press star one on your telephone again Thats Star one on your Touchtone telephone to ask a question to withdraw your question press the pound key.

We ask that you saw.

Told that all analysts had the opportunity to ask a question, we'd like to remind everyone to limit themselves to one question only.

Thats Star, one and you touched on telephone.

Our first question comes from the line of Kathryn Thompson of Thompson Research Group your.

Your question please.

Hi, Thank you for taking my question today.

And also our implicit in earlier calls a day.

This is a tier ge's 12 month anniversary and a word if I recall correctly you guys with the very first day, we weren't marketing with and also the last before going into a global shutdown, but thank you over the years from your support.

Thank you and congratulations on what you and your team have built at <unk>.

From a question today is around guidance, if you could just clarify and delineate heritage guidance.

Versus.

The additive that you outlined in todays release with Taylor.

And help us understand why it wasn't raised in and also leading into that helping us better understand the current situation with cement in Texas given the shortages.

And how that also plays into your heritage guidance. Thank you Catherine again, congratulations to you and your team and thank you for the question I guess, a couple of things one of the guidance that we've reaffirmed this morning, it's simply our heritage guidance. So again, we've given you revenue and EBITDA numbers for Tiller, which you would need to go and add Avi.

C to the heritage guidance to get flipped from the effective guidance would be today. So that math is there it's very easy to do it. The other thing that we've not done is change guidance for the year share based on Q1. So remember we're in an outdoor sport and this has been January February and March and our view is changing it after those three.

Months feels a bit premature to us.

And again I think we came out with guidance at the beginning of the year. There was modestly ahead of where others would come out as well. So I think we have seen some degrees of guidance change today, but I think in many respects, it's been an effort to more balance.

Where we were when we came out at the beginning of the year. So that that's where we are relative to heritage guidance pleased to add to that what we've given you with respect to tiller as Jim said in his prepared remarks, we will come back at half year and revisit guidance one of the things. Obviously I think we will be revisiting will be what is happening with <unk>.

Amit as you know Kathryn that's the second part of your question, we only have cement in Texas and I would draw several things to your attention. The number one if we're looking at our backlog and cement the backlogs in cement.

Year over year, Archie up pretty considerably we're seeing submit tons up 24%. So number one that's a nice takeaway.

Two the results that we turned in for the first quarter, where despite the fact that that business was effectively shut down for 11 days in February from Texas stuck with some unseasonably cold weather.

We incurred about $7 million of expenses in the cement business.

Tied directly to energy and other pure production cost. We also had some inefficiencies that came from that that ended up giving us effectively nearly a $14 million headwind simply driven by that 11 day period.

The other thing that I'll point out is obviously, we do have a price increase that went into effect on April one.

At $8 a ton in that marketplace. The other thing that we have done recognizing that it is going to be tight in Texas. This year on cement, we have put out a letter in the marketplace.

Let our customers know that we're anticipating another $8 a ton price increase in September so again as we come back and give you. Some very specific answers to your question on cement and then ticking and tying that back to the guidance question. These are all a number of the variables that we will take into account as we.

Revisit guidance at half year.

Thank you.

You bet.

Thank you. Our next question comes from Trey Grooms of Stephens. Your line is open.

Hey, good morning, everyone.

Good morning Trent.

So during your recent analyst day, M&A was a major theme and it's encouraging to see you announced an accretive acquisition. This morning.

So first off could you talk about the deal rationale there.

Growing your presence in the Minneapolis, St. Paul market plays into your footprint strategically and any color about the outlook and the health of that market. There no happy to Trey. Thanks for the question you led off with the right thing and that is look we see this as accretive to cash and earnings in year, one punch a nice place to start.

When we're thinking of pillar <unk>.

If we think about to the store process keep in mind, we've long said that we have a leading position in 90% of our markets would that lead you to conclude that in 10% of the markets. We're not one or two this was one of the 10% of the markets. So again, we like the Minneapolis, St. Paul market place, we wanted to be a leader in that marketplace.

Through our store process, we had identified Minneapolis, St. Paul is an MSA, which we wanted to growth we had identified chiller, specifically as a target that we wanted to see if we could bring into Martin Marietta and there are several reasons for that number one if we look at Minneapolis St. Paul It's the 12th largest MSA in terms of aggregate consumption in the United States.

So one of the things that got my attention was when I saw that they are actually more aggregates consumed in Minneapolis, St. Paul than there are in Charlotte.

Which is not something that I think it's intuitive to a lot of people. The other thing Thats worth noting is Minnesota maintains the nation's fifth largest highway system and they've got a budget of about $3 $8 billion and about 90% of that goes to highways bridges and roads. So we like the way that they invest in that place. The other thing that I would.

Say, it's this is a leading upstream business. It's aggregates led it does have hot mix, but I want to be really clear here Trey it's not a lay down business theyre producing blacktop, that's basically being sold to contractors. So historically tiller has operated through a couple of subsidiaries Barton sand and gravel and thats literally there.

Sandy gravel business and then a business called commercial asphalt. So those two businesses really comprise what they have it's about 15 plus sites in the twin cities area. They've got a 30 year average life at their different locations and again they have an EBITDA there that blends very very nicely with what we have.

In the Central Division, so back to sore back to leading positions and in markets that we feel like are going to be attractive near term and long term. That's what Taylor brings this organization. The other thing that I would say, it's philosophically the organizations are extraordinarily well aligned and as I indicated in my prepared.

Remarks, we closed on that Friday, and we were absolutely thrilled to bring several hundred people from chiller into the Martin Marietta organization trained.

Great. Thanks for the color on that congrats on the transaction it looks like a good bit from you guys. Thank you. Thanks, so much strength.

Thank you. Our next question comes from Phil Inc of Jefferies. Your question. Please.

Hey, guys. Congrats on a really strong quarter, despite some challenging weather to start the year.

I guess based on some back of envelope math it looks like the full year average guidance would imply.

Some margin degradation call it starting to hire 10 basis points on a year over year basis.

Can you expand on that I don't know for simply over extrapolating <unk> and you guys are not changing your full year, just because it's just too early but any color on in terms of margins. The rest of the year for aggregates would be really helpful. Thanks.

I would say, it's really more the latter than the former and that is don't be too linear just looking at what's out there.

What I would say is.

Not updating guidance right now simply because it's Q1, obviously, we're very excited about what we saw in Q1, we're really excited about.

In fact that places like North Carolina Dot.

Our back.

The other thing that we're seeing in Q1 that I think will continue to see through the year as price fell through very very nicely you saw that the other thing that I think we note. We saw in Q1 was very good cost performance I anticipate that we will continue to see good cost performance throughout the year I think thats, where you can have some degrees of give and take that.

<unk> was diesel is likely to become an increasing headwind as we go through the year frankly in Q1, it wasn't much of a headwind it wasn't much of a tailwind either.

But if we look at some of the cost buckets in which we saw nice outperformance year over year freight moving material from a producing location to a yard was actually nicely better year over year now if we see more sales going out of sales yards as the year goes on obviously that freight.

Number would move so with revenue, but a number of things would move with that.

I'll tell you as well as contract services were down in other words, there was some stripping and other components that we're down repairs were down and we think those are likely the types of things that we will be able to hold on to and I think thats evidence of good capital spend equally we saw lower personnel costs. If you recall last year, we did do some.

<unk> that was not necessarily COVID-19 related the timing of it just worked out very very nicely. So what I would encourage you not to do is again take the guidance that we have not changed and then just assume everything continues from linear fashion again, Thats why we want to come back at half year and address it but again.

Like the pricing dynamics that we're seeing in both aggregates and cement I think our teams have done an extraordinary job relative to costs again, if youre looking at gross profit per ton in the quarter and you saw that going up at 34, 5% Inc.

Looking at cash gross profit per ton to growth.

Almost 23% on that from what I can tell it looks like best in class types of metrics. So again, we feel very good about where we sit right now and to be clear we feel good about the balance of the year.

Okay Super helpful. It sounds like all the good work you're doing on the cost front and pricing is sticking so that's really encouraging. Thanks, a lot guys. Thank you Phil.

Thank you. Our next question comes from Stanley Elliott.

Please go ahead.

Hey, good morning, everybody. Thank you for taking the call.

You mentioned the strong Q1.

Any commentary you'd want to share with us around how April trended relative to expectations and then along those lines.

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Commentary for pricing overall.

I will address more pricing then I will April last year standard as you recall, we actually did talk a little bit about the quarters ahead, and we were being encouraged to do that by the SEC and others. Because it was such an extraordinary period of time and as you know our view typically has to live very tightly within the quarters and we were doing that in large part because.

People were moving guidance last year. So I won't go into April per Se I will say clearly there was nice momentum coming into into Q1.

Relative to pricing what I would say is there are no surprises.

On the aggregates piece of it it's working exactly the way that we would have anticipated and the way that we planned you saw the breakdown between reported and mix adjusted as we talked about the quarter again reported up $3 four mix adjusted to two five.

Again, that's very much within the guide that we've given.

I think it is possible this year that you might see some aggregate tightness in certain markets on certain sizes, it's hard to tell at this moment, but I certainly think that that's possible. If we see some of that I think we could see some.

Very discrete.

Price changes maybe on a size basis later in the year now all of us relative to aggregates, if we're speaking of cement.

It's obviously a different circumstance so keep in mind. This is not a nationwide cement business. This is a texas cement business.

Cement is tight and Texas, we feel very good about the $8 increase that we put into effect on April one we expect all of that for example to stick in the North Texas market. We think most of that is going to stick in the central market as well and again as I think I indicated before our intention stated intention.

Published intention by letters to our customers is another $8 a ton price increase on September one and to give you a sense of it that's going to be the first mid year.

If that market is going to C. Since 2014, so I think that gives you a good sense of at least the degree of confidence that we have in pricing in that market standpoint.

No. It all sounds very encouraging thank you guys and best of luck. Thank you Stanley.

Thank you. Our next question comes from Timna Tanners of Bank of America. Your line is open.

Hey, good morning, guys hope you're doing well.

I wanted to ask a little bit more about cost if I could obviously diesel is the most transparent, but you've seen huge increases in materials, such as steel that I know you use a lot of them were hearing tightness in labor and transportation. The other so if you could address some of those challenges and any offsets that we should think about going forward.

That'd be great no Timna I appreciate the question if we go through our business, we're not seeing significant hits from inflation as we look at it against so if we think about the buckets.

B cost for us our single biggest bucket is going to be personnel I mean, the biggest thing that we're going to be able to flex. There is what overtime hours looked like in some markets because we largely have the teams in place that we need to put the materials on the ground.

The other thing that and on some occasions can be a bit of a challenge in some circumstances the freight as.

As we indicated in the first quarter freight was actually down because we are seeing less moved by rail I mean, if that goes up later in the year, what I would suggest to us that is probably going to be a relatively high class problems. So we're certainly not concerned about that.

Again, we've got a good set of vendors we have a good supply chain in place most of our supply chain is domestic we think that very much cuts in our favor. So again as we're looking at our overall cost profile.

I'm very happy to report to you we don't see anything in the cost profile that we feel like it's going to be anything of particular moment I will turn it to Jim to see if he has anything he'd like to add to that.

Steel prices is a commodity market matter, obviously, a very elevated we're not seeing it we actually.

Did a pre buy of mobile equipment from Caterpillar Komatsu earlier in the year. So we think we got ahead of any price increases that are coming our way.

And to the extent that steel prices are inflating plant equipment et cetera, a whole price of that next year, but we're not seeing it yet this year.

Okay. Thanks, a lot guys.

Thank you Tim.

Thank you. Our next question comes from Anthony Pettinari.

Citi. Your line is open.

Hi, good morning.

Amit you appointed Hi, you pointed to lower contract services in the quarter as a driver of improved improved gross margin and I'm. Just wondering if you can provide any more detail on what drove that and how we should expect.

Contract services, maybe to come back or trend in <unk>, the remainder of the year.

You know what I think the primary thing overall contract services was really cost aided by lower repairs lower contract services by rating in particular, so it's largely stripping costs.

We did not have as much stripping that we needed to do year over year. So it.

Largely it's those two things, but repairs MMR and grading would be two that I would highlight for you.

Okay. That's helpful I'll turn it over.

You bet. Thank you Martin.

Thank you. Our next question comes from Jerry Rabbit.

Goldman Sachs. Your question please.

Yes, hi, good morning, everyone.

Good morning, Jerry.

Oh.

Can you talk about.

The M&A pipeline.

From here, obviously, you outlined a broad range of geographic targets at the analyst day.

How optimistic are you on.

Additional capital deployment opportunities over the next couple of quarters.

And if you could can you just comment on if youre seeing people wanting to close quicker as a result of concerns about potentially higher capital gains taxes next year.

Jerry Thanks for the question I guess several things one look tiller. If we were talking about tiller 10 years ago, we would actually be giving you a lot of details on pillar because it would have been material to this company 10 years ago, it's not material today. So.

Killer, a very nice acquisition, but having done pillar number one it's important to state that that doesn't do anything to draw down our firepower for the rest of the year. So let's start with that notion. So we've done one it's completely consistent with store and we like it very much number two the pipeline of deals that were law.

Looking at is a pretty robust pipeline right now and I will share with you. Some of them are larger than tailor. Some of them are smaller than talk so it's impossible to know exactly how any of those will go.

Our team has consistently had a very disciplined approach to M&A.

That's what you will continue to C has to do think we were very clear in outlining areas in which we wanted to grow during analyst and Investor day, and making sure that we went to those markets, where we did not have a leading position and seeing if we could find a way to a leading position in those markets.

What's important and again thats been completely consistent with what we did in tiller with respect to timing I'm.

I'm not necessarily seeing people wanting to get things closed necessarily faster.

I think most of them are more focused on either generational changes within a company or theyre focused with a different strategy that they may be looking toward.

Everybody is focused as you would imagine as a week on value and so the conversations around that are important equally are the synergies that we feel like we can pull out of transaction. So obviously, we're measuring those very carefully.

If we go back over time and look at the value that we've been able to deliver whether it was on tsi fore river for the Rockies or what we did with bluegrass or otherwise I think our track record. There is good and it's certainly our hope to be busy on the M&A front for the rest of the year, but what I would suggest to you.

In that respect as theres more to come.

Thank you.

Thank you Jerry.

Thank you. Our next question comes from David Macgregor.

Longbow Research your question please.

Yes, good morning, everyone revenue, David a good quarter. Thank you good morning.

You laid out your market mix earlier, just talking about infrastructure non res grass and the percentages that would correspond with each and I'm. Just wondering how that may vary from what <unk> got built into your guidance for 2021, and just if you could talk about how you see that mix migrating over the balance of the year that would be helpful.

No look I think several things are pretty clear I think infrastructure is going to become increasingly better and I would say that because if we're looking at our top five states, which again are going to be over 70% of our revenue when we think about what that looks like.

Texas, FY 2021, leading levels of $1 5 billion from a textile perspective is a 22% increase from where it was in 2020.

That's a very attractive number equally if we look at Sidoti their FY 2021, blending schedules are projected at $1 3 billion and that's up from $670 million. So again those are those are big movements, and even Florida, which you know David has long had a very attractive infrastructure budget is.

Indicating higher Lettings this year and theyre emphasizing projects that they feel like we're ready to go. So if we come back to a couple of states that are also important to Georgia and Colorado. Those states. We're seeing is relatively flat year over year, but I think something that's worth keeping in mind is a lot of the COVID-19 economic relief that went to video.

<unk> are about to find their way into the system as well so keep in mind, Colorado got $134 million in that process and George you got $323 million from that process. So we think infrastructure is going to continue to get increasingly attractive and depending on what happens in D. C.

It can really become increasingly attractive next year I think the thing that we're continue to be moved by.

Is how solid the non res market and you can see it in the percentages that we do we talked about in today's release the market for industrial logistics and data center facilities continues to flourish and clearly that's benefiting from the critical role that these facilities play in supporting business operations, and we think we're incredibly well positioned to serve.

Markets like Atlanta, DFW, Austin, San Antonio des Moines, and Omaha, Indianapolis and others, what's important there, though David is we're seeing what we thought we would see but we are seeing it modestly earlier and that is if you recall from we gave our guidance at the beginning of the year. Our view was we thought we would start to see some <unk>.

<unk> shoots in light non res in half two I think the words, we use where we thought we would start to see that inflect then we still do but what's encouraging is we're seeing some of that in some markets even earlier than we would've thought.

For example, if we're looking in Atlanta today, clearly Atlanta is seeing a significant uptick in corporate relocations and expansions, which plays well into the white piece of it equally Colorado is seeing good light commercial and office and retail and that's starting to pick up now and Thats an area that we knew would come.

Because it's going to follow housing with a lag we just thought the lag might be a little bit longer and then importantly, as we're looking at residential today, we think Martin Marietta with the southeast southwest and footprint.

Is particularly well positioned to benefit from what's happening with housing. So again, if we put housing in context. The 30 year average for single family starts is a million or.

So if we consider that as the Threep is a key threshold for what we think is normalized aggregates focused demand, where we think we're going to be for the next several years in that dimension is pretty exciting because we talked about at the analyst Investor day that there is a correlation between single family starts in aggregates intensity with a one year lag that's it.

About 99% and if you look at the March 2021 seasonally adjusted annual rate of housing in the United States for single family starts. It was at $1 2 million and again the last time, we saw numbers like that we're back in 2007 and back in 2001 and by the way we like the way the market is look.

At both of those times, so I think infrastructure is clearly getting better.

We think non res from the heavy side as attractive right now, but we think light it is getting better and we think housing but in particular single family housing and Martin Marietta markets is really being held back only by availability today and again when we're trying to rank problems, David Thats, probably a high class problem.

Okay. Okay. Thanks, a lot. Thank you.

Thank you. Our next question comes from Garik <unk> of loop capital. Please go ahead.

Great. Thanks for taking my question given some of the mid year price increase opportunities you cited particularly in aggregates and given the inflationary environment that you're in order just curious how we should think about the cadence of pricing, yes. The rest of the year and I know were non into 2022, yet, but should we anticipate a breakout price growth potentially next year.

Yeah, Garik just to be clear.

When I was speaking to the to the aggregates piece of it I think what I said was I thought we might see some discrete wins on our side by side size basis, if it gets tight in some markets.

And clearly the submit commentary that I offered was different than that because we're already seeing tightness.

Very large market in Texas.

But back to your commentary what we've long said is pricing on a percentage.

Tends to follow volume to a degree on a percentage with a bit of a lag.

So garik if youre looking at the marketplace and you are saying.

Look I know you've got a markup going on in house TNI on an infrastructure Bill you've got a markup going on incentive E. W. On an infrastructure bill it looks like something is going to happen. It looks like something is going to happen. This year. It looks like whatever that's something is likely to be the biggest something that we've seen in 15 years.

<unk> I think that bodes well for volume if we go back to the commentary that I was just offering to David and his question relative to non resin roose.

We think thats, probably pretty healthy too so I think coming back to the proposition that you're offering if the volume is going to be there I do think it gives the opportunity for there to be pricing ahead of what we've seen over the last several years because keep in mind, that's been very much in a volume muted environment.

The pricing that we just offered through.

Through the course of this conversation is with aggregate volumes actually down 3% in the quarter and by the way we anticipated that so.

I think the proposition that you've offered is right I think there's still more to watch and more to come but I have a hard time.

Thinking that what you've posed isn't.

Where we would think about it garik.

Great. Thank you.

Thank you.

Thank you. Our next question comes from Adam Palmer Thompson Davis Your line is open.

Hey, good morning, guys good morning Ann.

Or can you comment on the multiple you paid for Taylor.

Give us any kind of a sense for your your net debt after closing the deal.

What I will do more of the latter than the former and because as I said, if pillar had been 10 years ago. It would've been material and we would talk about it. Obviously this is a transaction we've done with the family and we have non disclosure obligations that we want to remain confident secure around.

I'll turn it over to Jim because what you'll hear is despite the fact that we've done what would have been a very notable transaction a decade ago, we're still in very attractive spot Joe Yes, it's really doesn't meaningfully change our.

Our debt to EBITDA leverage Adam we're still just.

South of our two to two five times.

Target zone. So this really will not be much of an impact for for our M&A pipeline and executing on that going forward and our liquidity is great cash flows good and improving and as we mentioned this deal is accretive to earnings and cash flow in year one.

Okay. Thanks, Jim.

Ed.

Thank you. Our next question comes from Josh Wilson of Raymond James. Please go ahead.

Good morning Ward, Jim Thanks for taking my question you bet Josh.

Wanted to come at the AG Martin just one more time and I. Appreciate <unk> was an unusual quarter, but if you could just quantify for us some of the the good guys and bad guys there.

Or up 500 basis points from basically flat dollars. Just so we can get a sense of the size of which ones are sustainable and which are maybe if you could quantify diesel fuel going forward as well. So we can have a flavor for that that would be helpful. Yes. Let me do this let me let me ask Jim to come back and address some of the very specific puts and takes on that and I'll give you some broad commentary afterwards.

Yes, so Josh at all sustainable.

Good guys as you call it for the quarter was price that's something that's our old friend, that's up $19 million.

Benefit this quarter.

One of the bad guys with volume down, 3% that was about $5 million of profit impact.

The rest are good guidance so <unk>.

Internal freight expense improved by $6 million again that depends on end markets and depends where that make that may stay where it's at.

Grow again, if we have higher sales to yard cause.

<unk> services improved by $5 million compares.

<unk> expense improved by $3 5 million.

Personnel expense improved by $2 million diesel expense improved by just under $1 million or basically neutral, but almost across the board improved low.

<unk> expenses for the quarter.

So Josh if we think about with the background of that what we're likely to see going forward I would say several things if you're looking for things that will be a headwind I think the biggest single headwinds the industry will likely face will be diesel fuel.

Remember last year energy was quite low, but if we think about what we're seeing we think pricing is going to continue to be very attractive for us. We think geographic mix is likely to be attractive force. This year because keep in mind, we had a record year last year with North Carolina really sitting on the bench in North Carolina is not sitting on the bench at all anymore, we eat.

We believe that our aggregates business in Texas, and our cement business in Texas is going to perform very very well this year.

We think Colorado is going to have a very attractive year. The only thing thats wrong in Colorado in 'twenty. One is that Colorado had a superb 20, so keep in mind they had a very wet 19.

Deferred work from 19 into 'twenty and then they literally had the perfect storm in 'twenty with beautiful weather and the late winter setting in so I think Jim is giving you a good sense of where some of the good guys and bad guidance or I think there are a lot more good guidance and bad guys. I think one more good guy I want to make sure we call out because they really don't get the credit.

That they deserve is what we think is happening with respect to magnesia specialties as well.

Again this is a real differentiator from Martin Marietta Q1 revenues of $65 million represents almost a 9% increase over the prior year and that's led by Jim was referring to earlier is a nicely resurgence steel industry. So if we're looking at domestic steel that's rebounded now to 78% capacity keep in mind when we were.

About half year last year that was at 51% utilization. So again, we're seeing even in that line of our business.

Very nice recovery and we're seeing record Q1 gross profit in that business, but importantly, we're seeing record margin percentages in that business that corresponds with what it was seeing a year ago. In Q1, So we feel like both on the magnesia specialties business and the materials business.

We're at a very attractive place, where theres going to be more of this goodness that goes forward then we're going to get back.

Excellent that's very helpful color. Good luck with the next quarter. Thank you Josh.

Thank you. Our next question comes from Michael Dudas of vertical research. Your line is open.

Good morning, Suzanne Jim Award.

Hi, Mike.

The.

Thinking about.

The release with COVID-19 relief money, that's starting to get out and probably be more factored in later this year.

Are you anticipating because theres some discretion from states governments on that front are you anticipating.

A portion or a good portion a little portion of that falling into the 'twenty two fiscal year budgets and then when you think about layering in let's hope and eventual fast Act renewal.

Big successful infrastructure Bill somehow is that going to also influence like how you think about what the opportunity is going to be for 'twenty, two 'twenty three and beyond because that seems to be a lot of lot of capital flowing into the markets that could be coming free type of them.

No look we agree and the short answer is look if we look at that $10 billion on the COVID-19 economic relief that's already out there we've talked about some of the dollars that have gone specifically to places like Georgia $323 million in Colorado, but I mean to put some more context to it if we look at Texas that was 914 million.

North Carolina $260 million in Florida is $473 million.

Even in a state like Indiana at $238 million. So these are dollars that can move needles.

Answer number one do we see that a decent piece of it going late 'twenty, one or into 'twenty. Two I think the answer is yes, we do.

Do we think we're going to see a new highway bill it notably higher numbers either through the reauthorization process or other processes, we believe that we will.

We think that will likely impact 'twenty, two but we think that's probably likely to be even more impactful by the time, we get to 'twenty three.

Now with respect to the ability to meet what that need is going to be I would say several things one contractors have been hiring because they had the ability to hire during periods of time when labor was tighter in other places so we.

We believe contractors are going to be in a position to meet this amped up need.

In an appropriate and responsible ways.

Importantly from a materials supply perspective, what I can tell you is we have a business that would have the ability should we need to.

To put about 250 million tonnes of material on the ground and.

And if you look at what we produced and sold last year led by sales to 180, some materials tons of materials. So our ability to ramp up if we needed to is there its presence and what's important to state and I think this goes back to the essence of your question Mike.

Would not have to put notable capital and to do it we might have to run some longer hours to do it.

But we could certainly do that without having to go deep to dwell on capex. So I hope that helps.

Yes, that's perfect.

Leading to the certainly operating Leverages is quite there do you have a gut feel whether it's gonna be reconciliation or fastback renewal or brand new bipartisan.

Opportunity.

That's a great question and the only thing I can tell you as we can all that and we'll probably all be wrong. In some respect I think this is one that they are likely to find a bipartisan way to do.

And I think if they do it's going to be a lot more highways bridges and roads focused than some of the administration proposals that are out there I think if they can find a way to make it more infrastructure in the way you and I will define infrastructure, there's a weight towards the bipartisan agreement I think if it can.

<unk> be more focused on that than I think reconciliation and other methodology comes into play in a more significant way.

But again.

As I'm looking at Mark ups that are underway in both the <unk> and the Senate and TNI and the house right. Now there is a reason that they're marching that up and there is a reason that I think they want to have mark out markups out.

By Memorial Day.

There'll be more to come but I think we'll find bipartisan agreement on this a betting man.

That sounds encouraging I hope that happens. Thank you working day bye. Thanks, so much.

Thank you. Our next question comes from Paul Roger of Exane BNP Partners. Your line is open.

Paul are you there Mr.

Roger Please make sure your line isn't muted speaker phone lift your handset.

Yes that was the scope all yet and again I apologize for that guidance and congratulations on the staff.

Thank you Paul good to hear your voice.

Yes.

So obviously coming from the end of the call I'll, maybe take a slightly different task I'd asked about the green agenda.

I mean, clearly the environmental agenda, Kelly and opened in the U S.

You see flow.

This is an opportunity for you.

And maybe specifically.

At all concerned that we could see an increase in the use of recycled aggregates.

At the expense of some higher margin products.

Paul Thanks for your question look you are right ESG is clearly taking up a new form of debate both in the United States and as Youre, well aware internationally I would say several things I do think there are opportunities for Martin Marietta as we go through that number one I think resilient construction is going to be an important part of any dialogue relative to ESG.

We can demonstrate that the types of constructions in which we will participate tend to meet that criteria number one number two if we're looking at wind farms and wind generation of power one of the things that we've called out specifically last year. We were seeing I think it was in Q4 tonnage was down over a million tons Jeff.

<unk>, our Midwest Division.

We had seen that division not having as much tonnage go out to wind energy projects, because some tax credits that historically had been in place had expired.

We're seeing more tax credits going toward wind energy and we believe that we will we think the opportunities are therefore that.

Another area of focus is likely to be relative to water and into infrastructure. That's underground and I think people are particularly sensitive to degrees of water that communities are simply losing on a year in year out basis. We think our products are going to be vitally important in that as well now with respect to.

Green and recycle and how thats going to work in different markets and the degree to which recycled concrete or otherwise could become more ubiquitous.

I would offer several things.

One specifications are still going to be drawn up by obviously our friends at ASTM.

The federal government and different state Dot's.

Keep in mind crushed stone is an essential element in the manufacture of ready mix concrete, it's essential and hot mix asphalt at least in the recycled asphalt paving that we see the primary component of recycled it's valuable to contractors and that is not so much the stone, but rather the bitumen or the liquid asked.

Fault that send that so we think we will continue to see that but even most of your state dot's that are aggressive with what can be used on wrap a recycled asphalt paving it's 25% to 30%. So we don't think thats going to be a significant replacement for aggregates.

And equally while you can have certain degrees of crushed concrete that can serve as a commercial base.

In most instances it will still not meet a clean stone specification for use in and heavy highway airport or other work. The other thing to remember Paul and this is so important.

And that is despite the fact that our company has seen a nice increase in a steady increase in pricing over time.

Still selling aggregates on average for let's call it $14 $15 a ton it's.

It's very difficult to have even a green product that can substitute for aggregates, that's going to be a cost effective product in that respect because even when people utilizing.

Recycled concrete oftentimes theres rebar in that concrete, which means the crushing process tends to be quite complicated.

You asked me what time it was probably told you how to build a clock, but it's a great question and it's complicated it's something we've given a lot of thought to.

We have a lot of Brazilian surround the view that this is an industry that is here for a long time.

That's great.

The perception that some time in the U S companies locks.

I think that's solid.

Well Paul Thank you so much for that and the other thing that I would remind you we put out our sustainability report literally last week that gives a good overview of exactly how Martin Marietta is approaching ESG issues. So thank you so much for your comment on that.

As I understand it that's the end of our questions today, So what I'll do at this point is thank you all for joining today's earnings call in short we believe our company is superbly positioned to create substantial long term shareholder value supported by our differentiated business model and proven strategic operating analysis and review Martin.

<unk> is poised to drive substantial growth in 2021 and beyond we look forward to sharing our second quarter 2021 results in just a few months as always we're available for any follow up questions. Thank you for your time and your continued support of Martin Marietta, Please stay safe and stay healthy take care Bye bye.

This concludes today's conference call. Thank you for participating you may now disconnect.

Okay.

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