Good morning, ladies and gentlemen. And welcome to Martin Marietta's Fourth Quarter and Full Year 2020 Earnings Conference Call. All participants are now in a listen-only mode. A question-and-answer session will follow the company's prepared remarks. As a reminder, today's call is being recorded and will be available for the replay on the company's website. I will now turn the call over to your host, Ms. Suzanne Osberg, Martin Marietta's Vice President of Investor Relations. Suzanne, you may begin.

Good morning, and thank you for joining Martin Marietta's fourth quarter and full year 2020 earnings call. With me today are Ward Nye, Chairman and Chief Executive Officer; and Jim Nickolas, Senior Vice President and Chief Financial Officer. As a reminder, today's discussion may include forward-looking statements as defined by United States securities laws in connection with future events, future operating results or financial performance. Like other businesses, Martin Marietta is subject to risks and uncertainties that could cause actual results to differ materially. Except as legally required, we undertake no obligation to publicly update or revise any forward-looking statements, whether resulting from new information, future developments or otherwise. Please refer to the legal disclaimers contained in today's earnings release and other filings with the Securities and Exchange Commission, which are available on both our own and the SEC website. We have made available during this webcast and on the Investor Relations section of our website, 2020 supplemental information that summarizes our financial results and trends. In addition, any non-GAAP measures discussed today are defined and reconciled to the most directly comparable GAAP measure in our earnings release and SEC filings. Ward Nye will begin today's earnings call with a discussion of our full year operating performance. Jim Nickolas will then review our 2020 financial results and liquidity position. After which, Ward will discuss market trends and our 2021 outlook. A question-and-answer session will follow. I will now turn the call over to Ward.

Thank you, Suzanne, and thank you all for joining today's teleconference. We sincerely hope that you and your families remain safe and healthy. By all accounts, 2020 was extraordinary for Martin Marietta. We're proud to have extended our long track record of financial, operational and safety excellence, particularly in a year filled with unprecedented disruption. Martin Marietta set new performance records, delivering a profitable year and the best safety performance in our company's history. These impressive results demonstrate our resilient business model and our team's commitment to Martin Marietta's vision and successful execution of our proven Strategic Operating Analysis and Review or SOAR plan. As noted, today's discussion focuses on our full year results and 2021 outlook. Before doing so, I'll highlight a few notable takeaways from our record setting fourth quarter. Importantly, we achieved solid shipment and pricing growth across all product lines as construction activity stabilized from the spring and summer months when we saw a greater impact from COVID-19. These top-line improvements, along with our steadfast focus on cost controls, resulted in 7% growth in consolidated total revenues, 20% growth in adjusted earnings before interest, taxes, depreciation and amortization or adjusted EBITDA and a 40% increase in diluted earnings per share. For the full year, we established new records for products and services revenues, profitability and adjusted EBITDA. Specifically, full year consolidated products and services revenues increased to $4.4 billion, consolidated gross profit increased 6% to $1.3 billion, adjusted EBITDA increased 11% to nearly $1.4 billion and diluted earnings per share was $11.54, an 18% improvement. Martin Marietta's 2020 results marked the ninth consecutive year of growth in these financial metrics. Operating our business safely sets the foundation for our longstanding financial success. Martin Marietta's industry-leading safety performance continues to trend near or exceed world class safety levels. We achieved a 25% reduction in total reportable incidents across the enterprise in 2020. And for the fourth consecutive year, we achieved a company-wide world class lost time incident rate. These superior financial and safety results are directly attributable to the dedication and agility of our nearly 9,000 talented employees. I'm extraordinarily proud of how our team managed the challenges and disruptions caused by the pandemic while remaining focused on being good wingmen, working safely and efficiently together and seamlessly meeting our diverse stakeholders’ needs. With that overview, let's now turn to our full year operating performance. Aggregate shipments declined 2% to nearly 187 million tons, reflecting anticipated lower infrastructure shipments in portions of North Carolina, reduced energy sector demand and headwinds from COVID-19 disruptions. However, in line with broader macroeconomic trends, full year aggregate shipments to the residential market increased, benefiting from healthy single-family housing activity. Aggregates’ average selling price increased 4% on a mix adjusted basis, in line with our expectations. Importantly, all divisions contributed to this solid growth, a testament to this product line’s resilient pricing power and our leading market positions in attractive geographies. The disciplined execution of our locally driven pricing strategy, along with attractive underlying market fundamentals will continue to support sustainable pricing growth moving forward. Our cement operations established new records for shipments, which increased 2% to nearly 4 million tons. Large project activity supported underlying product demand in both North and South Texas throughout the year, offsetting weakness in the energy sector. Pricing increased 3% on a mix adjusted basis, demonstrating the resilient price fundamentals of core products in the State of Texas. We expect our cement business will continue to benefit from favorable shipment and pricing trends, supported by tight supply and healthy demand in Texas, diversified customer backlogs and April 2021 price increases. Turning to our targeted downstream businesses. Ready-mixed concrete shipments increased 3%, excluding shipments from acquired operations and from our Southwest division's former concrete business in Arkansas, Louisiana and Eastern Texas, which we divested in January 2020. Concrete pricing increased 2%. Our Colorado asphalt and paving business established a new record for asphalt shipments, increasing 15% to 3 million tons. This growth reflected solid underlying product demand together with carryover work following a weather challenged 2019. Asphalt pricing increased nearly 3%. I'll now turn the call over to Jim to discuss more specifically our full year financial results and liquidity. Jim?

Thank you, Ward, and good morning to everyone. We concluded 2020 with the highest full year adjusted EBITDA margin in Martin Marietta's history. Driving this achievement was our Building Materials business, which delivered record products and services revenues of $4.2 billion, a 1% increase, and record product gross profit of $1.2 billion, a 7% increase. Our Upstream Materials businesses, namely, aggregates and cement, established all-time records for both full year product revenues and gross profit. Aggregates’ product gross margin expanded 130 basis points to 30.6%, a new record, and unit profitability improved 8%. These accomplishments, which resulted from strong pricing gains, disciplined cost management and lower diesel fuel costs demonstrate the cost flexibility and resiliency of our aggregates-led business. The Cement business benefited from the planned kiln maintenance outage that occurred through the end of 2019. The timing of that outage resulted in some expenses being recognized in 2019 versus early in 2020. More importantly, that and other capital investments have dramatically improved our cement operations. We achieved 90% kiln reliability this year, up from 82% in 2019, which facilitated increased throughput and fixed cost absorption at both our Midlothian and Hunter plants. These factors, combined with mix adjusted pricing strength and lower fuel costs, contributed to the 510 basis point improvement in Cement product gross margin to 37.8%. Our targeted downstream businesses also delivered solid full year financial results. Ready-mixed concrete product gross margin increased 10 basis points to 8.4% as pricing growth offset higher raw material costs. Asphalt and paving achieved gross profit of $60 million and a 100 basis point improvement in gross margin, driven by double-digit revenue growth. Our Magnesia Specialties business returned to revenue and profitability growth during the fourth quarter. The 12% top-line improvement in the quarter, however, was not enough to offset demand declines experienced earlier in the year. As a result, full year product revenues decreased 12% to $221 million. We anticipate fourth quarter strength in line with chemicals demand to continue in 2021, now that steel utilization has rebounded from last summer's COVID-19-driven trough and our cobalt customers are resuming activity. Impressively, product gross margin improved 80 basis points to 40.6% as we proactively responded to lower shipments with effective cost control measures. Turning now to cash generation, capital allocation and liquidity. Martin Marietta ended 2020 with the strongest cash generation in our history. Operating cash flow of $1.05 billion increased 9%, driven by earnings growth. 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: focus on value-enhancing acquisitions, prudent organic capital investment and the consistent return of capital to shareholders while maintaining our investment-grade rating profile. For 2020, we invested $360 million of capital into our business and returned $190 million to shareholders through both an increased dividend and the first quarter repurchase of 211,000 shares of our common stock. In August 2020, our Board approved a 4% increase in our quarterly cash dividend underscoring its continued confidence in our future performance and continuing Martin Marietta's track record of dividend growth. Since our repurchase authorization announcement in February 2015, we have returned more than $1.8 billion to shareholders through a combination of meaningful and sustainable dividends as well as share repurchases. We ended 2020 with a debt-to-EBITDA ratio of 1.9 times, slightly below our target leverage range of 2 times to 2.5 times, which offers us the flexibility to pursue accretive investment opportunities. Our solid balance sheet, combined with $1.1 billion of availability on our credit facilities, provides the financial strength for Martin Marietta to respond and to execute on disciplined capital allocation priorities and continue profitably growing our business. With that, I will turn the call back over to Ward to discuss our 2021 outlook.

Thanks, Jim. Looking ahead, we believe 2021 will be a year in which we see a return to a more normalized state as underlying demand fundamentals reset and the nation's economy regains momentum. We remain confident in Martin Marietta's attractive business drivers and are encouraged by accelerating long-term secular trends across our three primary end-use markets and key geographies. We expect these trends to drive construction-led aggregates-intensive growth. Infrastructure activity, particularly for aggregates-intensive highways, roads and streets, continues to prove resilient. With the one-year extension of the Fixing America's Surface Transportation Act or FAST Act at current funding levels, state and local governments have the visibility needed to plan, design and award transportation projects through the 2021 construction season. Importantly, estimated fiscal 2021 lettings for our top five Departments of Transportation, or DOTs, 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 us, representing 71% of our 2020 Building Materials business total revenues. Additionally, DOTs were recently granted nearly $10 billion of targeted relief as part of the Coronavirus Response and Relief Act passed in December 2020 to help offset pandemic-driven transportation revenue shortfalls. This funding assistance has the benefit of no state matching requirements. Based on preliminary estimates, over $2 billion of this assistance will be apportioned to Martin Marietta's top five states. Over the medium to long-term, we anticipate voter-approved state and local transportation measures and passage of a comprehensive federal transportation program package to promote multi-year growth in product demand. In November 2020, voters sent a powerful message of support for state and local transportation investment approving 94% of ballot measures, the highest ever approval rating. These initiatives are estimated to generate an additional $14 billion in one-time and recurring transportation funding, of which 82% is in Texas, our top revenue-generating state. Bipartisan support exists for new surface transportation legislation aimed at increasing funding levels not seen in over 15 years, with both the United States House of Representatives and Senate previously advancing proposed bills. We believe this 117th Congress creates a path toward advancing a notable increase in funding over the FAST Act. We're optimistic that agreement on a new bill could be reached this summer, generating meaningful benefits in 2022 and beyond. We expect increased infrastructure investment to provide volume stability and drive aggregate shipments in that end-use closer to our 10-year historical average of 43% of our total shipments. For reference, aggregate shipments to the infrastructure market accounted for 36% of 2020 shipments. Non-residential construction should continue to benefit from accelerating e-commerce and remote work trends that require increased investment in heavy industrial warehouses and data centers, particularly in our key metros of Dallas-Fort Worth, San Antonio, Austin, Denver, Des Moines, Indianapolis, Charlotte and Atlanta. Importantly, this type of construction tends to be more aggregates-intensive than light commercial construction due to the size, scale and structure of these projects. Light commercial and retail construction will remain comparatively challenged until COVID-19 vaccines are more widely distributed. Over the longer term, light non-residential activity will benefit from the attractive collateral effects of strong single-family residential trends. Aggregate shipments to the non-residential market accounted for 34% of 2020 shipments. Single-family housing is poised for multi-year growth returning to more normalized levels during this economic cycle. We believe Martin Marietta's leading Southeastern and Southwestern footprint positions the company to be a notable beneficiary of these trends given underbuilt conditions, favorable population and employment dynamics, land availability, mild climates and lower cost of living in these regions. Single-family housing is two to three times more aggregates-intensive than multi-family construction, given the ancillary non-residential and infrastructure needs of new suburban communities. Aggregates to the residential market accounted for 24% of 2020 shipments. In summary, we're confident in the fundamental strength and underlying drivers of our business. As disclosed in today's release, we've returned to providing full year annual guidance. We currently expect 2021 aggregate shipment growth to range from up 1% to up 4%, reflecting single-family housing strength, expanded infrastructure investment and heavy industrial projects of scale that will support our near-term shipment levels. We remain confident that our favorable pricing trends are sustainable, supported by improved contractor confidence and healthy customer backlogs. For 2021, we expect annual aggregates price increases, which become effective from January 1 to April 1, to increase in a range of up 3% to up 5%. Combined with contributions from our Cement, Downstream and Magnesia Specialties businesses, on a consolidated basis, we expect adjusted EBITDA of $1,350 million to $1,450 million. Keep in mind, when comparing this guidance range to prior year, we're not anticipating the same level of non-recurring gains from land sales and divested surplus assets as seen in 2020. To conclude, we're proud of our 2020 record financial results and industry-leading safety performance. We're also extremely optimistic about our future. Martin Marietta has a strong foundation, thanks to our solid balance sheet and the investments we've made in our assets, people and capabilities. Due to our work over the last several years, Martin Marietta is uniquely well positioned to capitalize on the emerging growth trends that are expected to support steady and sustainable construction activity over the long-term. Importantly, the disciplined execution of our strategic plan, coupled with our pricing discipline, operational excellence, prudent capital allocation and adherence to robust health protocols will continue to enhance Martin Marietta's solid foundation for enduring success. As we move forward, we have the resources, team and capabilities to drive value-enhancing growth. We're confident in Martin Marietta's opportunities to build on our successful track record of strong financial, operational and safety performance and remain focused on delivering superior returns for investors while meeting and exceeding our commitments to our other stakeholders, including our customers, employees and communities. If the operator will now provide the required instructions, we will turn our attention to addressing your questions.

Operator provided instructions on the question-and-answer process. I show our first question comes from the line of Kathryn Thompson from Thompson Research Group.

Nice results today, given a tough market. Wanted to focus on Cement. If you could discuss the pricing dynamics you saw in the quarter, and importantly, your thoughts on both volume and pricing going forward? And then just really kind of a follow-up related to cement somewhat, which is more on infrastructure. Do you see any potential air pockets in lettings, given reduced revenues? And when might that be seen, if ever? And how might that impact cement volumes and also aggregate volumes?

Well, Happy New Year to you, Kathryn. We'll walk through it. Let's talk about cement and pricing first. Number one, to see the cement price performance in Texas this year was actually affirming. If we go back over time and remember how we spoke about cement when we acquired it with TXI, we indicated we believe Texas cement pricing would start to act like aggregate pricing. That's exactly what we saw in this quarter. What I think is doubly important about that and impressive, keep in mind, for much of the year, we were not in a position to go and see our customers. So to see that type of performance on a mix adjusted basis is actually quite impressive. Keep in mind too, although you don't see it in the numbers, if we're looking at Type 1 and Type 2 cement, that was actually selling for closer to 4% up as opposed to 3% up. So if we're really looking at the bread-and-butter products, it looks quite impressive. If we look at overall cement dynamics in the State, Texas is a nice place to be in any heavy side building materials business. Because particularly for cement right now, demand outstrips supply, and that's always a good place to start. We think that's particularly going to be the case as we go through the year in North Texas this year. So again, that feeds directly into our operations in Midlothian. Equally, the marketplace that we're seeing around Hunter is actually quite attractive as well. What we see from a volume perspective has been driven by a series of things. One, by some big jobs. So in the North, we're seeing Loop 12. We're seeing I-635, which is also known as the LBJ. If you go down toward South Texas, what's going on relative to the Grand Parkway has been nicely generative or utilizing cement and ready-mix and aggregates and all the way through. So we think the outlook is frankly as good as we just saw in Q4. If you're looking really more to what potential air pockets could be, I'll tell you very candidly, in Texas, we don't see it, Kathryn. A couple of things lead me to believe that. One, the FY '21 lettings in Texas are actually 25% over where they were last year. In other words, we're looking for about $9.5 billion worth of lettings. The other two pieces to keep in mind is the 2021 revenue streams that we're seeing either coming through Prop 7 and Prop 1 in Texas are really quite healthy. So we're looking at transfers of about $2.5 billion this year relative to Prop 7 and about $1.2 billion relative to Prop 1. Something else that's worth keeping in mind, too, is when we were looking at the COVID relief that's called into different DOTs, Texas was the recipient of almost $914 million. Again, we spoke to the fact that those have not come encumbered with any particular state match. So for a state that already found itself in a very good position to have that extra money come in as well gives us a sense that we're in a very, very good place. As an ultimate reminder, Texas has a rainy fund of $10.5 billion that they have not tapped. So as we're looking at Texas, both near term, medium-term and long-term, we like very much what we see. So I hope that's responsive to your series of questions, Kathryn.

Our next question comes from the line of David MacGregor from Longbow Research.

Congratulations, Ward, on a really good quarter. And a good outlook statement as well. It's nice to see guidance again. Just staying on Cement. I guess how are you thinking about the guide that you provided $460 million to $500 million, what have you got for price versus volume in there? If you could help me with that? And also, it appears that maybe there's limited operating leverage in that guidance as well. I'm just wondering if that's maybe some of the kiln expenses from 2020 that got pulled into 2019 if those come back and maybe that's why you leave it on the leverage. And just if I could also add to that, you must be feeling some pinch points in terms of capacity in cement at this point. And I'm just wondering how you're thinking longer term about your capacity footprint. Do you flex your shipments with import tons? Or do you invest capital either organically or through acquisitions in building your capacity? Or maybe you're just happy with what you've got. If you could talk about that?

No, happy to, David. Thank you very much for your questions. We'll start with respect to pricing. So as we think about pricing in the Texas marketplace today, what we're seeing are price increases out there that have been put out. We put out a $9 a ton price increase effective in April. We've seen others that customers have shown us that have been closer to $6. So I think that gives you at least some base to think about relative to pricing for the year. I think equally, as we look at the likelihood of price increases hitting in different percentages, clearly, North Texas is going to look stronger than South Texas is. Central is going to be just fine. I think to your point, if it's going to be tight anywhere this year on cement tonnage, it's likely more in the Dallas-Fort Worth area, meaning Midlothian. And so we'll just have to watch that as the year goes on. One thing I would ask you to do is, and that is you asked a very good question around capacity in Texas, because you're going back to the notion that right now demand is outstripping supply. As you know, we have an Analyst and Investor Day that's coming up later this month. We're going to talk about some of the very specific capital initiatives that we have underway. And I would ask you to wait and listen to what we have to say about that particular process when we're talking to you live later in the month relative to our cement outlook and our aggregates outlook in Texas. With respect to some of the other numbers that you mentioned, you're entirely right relative to rhythm and cadence around kiln maintenance. We did have a relatively lower number of kiln maintenance in 2020. If we're looking at the overall kiln maintenance spend in 2020, it was about $19.7 million. As we're looking to see what it's going to be into the new year, we are looking at a number that's going to be somewhat higher than that. We're looking more at about a $22.7 million number for total kiln maintenance in '21. And so we're looking at some of those puts and takes. But I think that gives you a sense of do we have capacity issues that we need to think about longer and medium term? Yes, we do. Are we in a circumstance that pricing is doing what we thought it would? It absolutely is. Are the dollars that we've put into the kilns having them run at a higher rate of efficiency? There's no doubt that they are. So if we're looking at kiln reliability, as Jim commented in his commentary, they ran at 90% kiln reliability in the year just ended. The year before, it was at 82%. So we like very much the way that business is going operationally, the way that business is going commercially and what we feel like its future is. So David, I hope that was responsive to your question.

Our next question comes from the line of Trey Grooms from Stephens, Inc.

So I guess, first off, I'm looking at the volume guidance for aggregates, and I appreciate your color and comments on the end markets. But especially on the infrastructure piece, you sound more constructive on that side than we've heard in a while. I want to make sure I'm hearing that right because it sounds like you're expecting increased demand versus 2020. With that mix becoming closer to the historic average, even directionally that implies decent volume growth in that end market. I know you mentioned some details around Texas, but could you touch on some of the other markets you're in where you're seeing the strength that's given you that increased confidence in that end market?

No, happy to, Trey. Thank you very much. As you indicated, we've walked through what some of the numbers look like in Texas. As Jim indicated in his prepared remarks, if we look at Texas, Colorado, North Carolina, Georgia and Florida, those states comprise around 71% of our revenue. So those states are going well, and a lot of things good happen for Martin Marietta. As I indicated, I won't go back through all the details that we hit, but we're looking at Texas lettings up 25%. Let's go through the others and I think that will give you a sense of why we've got the degree of confidence that we do. Colorado, which, as you know, in '20 had just a spectacular year. I mean, you heard us reference the fact that our asphalt and paving business in that state had a record year. We're looking at a DOT program in Colorado that we believe is going to be flat year-over-year. And what I'm about to tell you is when we're looking at our top five states, yet the worst that we're seeing anywhere is flat, that's not a bad place to be coming off of a record year. So if we're looking at the $10 billion COVID stimulus, about $134 million of those dollars is finding its way to Colorado, which we believe is to bring their DOT program up about even with where it was last year. Now by contrast, our home state, North Carolina, did not have a particularly good year last year. We think North Carolina DOT is in a far better position. And as you know, if we look at this state, historically, it has not only been one of our most profitable. It's been one of our most consistent as well. So we think North Carolina is trending back into an area that makes much more sense for us. To give you a sense of what that means, the FY '21 lettings projection is about $1.3 billion. That's $670 million better than I think people would have expected when they were looking at it last year. The other thing that's important to keep in mind is North Carolina did issue $700 million of build in C bonds. So again, as we're looking at the near-term future of North Carolina, we're really very pleased with that. One thing I will mention as well, the NC First Commission, which I was a part of here in North Carolina, looked at really how North Carolina needs to think about its investment in infrastructure over the next 10 years. And our view was they needed to put at least $20 billion more in infrastructure in the state. So the state is looking at ways to do that. But that's clearly longer term than just this year. If we go to Georgia, again, we think Georgia is relatively flat year-over-year. But if you look at where that state has been sequentially, if we go back to 2016, you'll see a budget that's gone from about $1.7 billion to one that's about $2.1 billion. And then the other thing to keep in mind is Georgia still has ahead of it the major mobility investment program. And the overall goal of that is to have a number of very large projects, about $12 billion to be more specific, underway by 2025 and completed by 2030. And then, of course, the last of the top five states is Florida; they're looking at their spending to increase about 20% year-over-year. So again, if we look at the top five, Texas is better, North Carolina is better. Florida is better and Colorado and Georgia are broadly flat. So when we look at that type of trajectory on something that's around 71% of our revenues in those states, I think that's part of what gives us the confidence that we have and the volume outlook that we've offered today.

All right, Ward, if I could sneak one in just for clarity. There was a question about cement and maintenance, and you provided helpful color on that. On the aggregates side, Jim, is there anything there? Obviously diesel will not be the tailwind you experienced in 2020, but are there any other costs coming down this year like they did in 2020? From a margin and cost standpoint you and the team did a great job then. Is any catch-up on costs baked into your guide, or is there anything else we should be aware of on that front?

Good question, Trey. We are anticipating, otherwise, hitting a 60% incremental target for next year, but for the diesel headwind. So our incremental is around 40% because of diesel. We've got about $30 million of higher expense from higher oil prices coming through. And we would add 60% but for that. So otherwise, our costs are well behaved. We're expecting them to be well controlled as they were in 2020. We expect that to continue. Hold on to the gains we saw in 2020 and build on those in 2021.

Our next question comes from the line of Anthony Pettinari from Citi.

Ward, on the full year outlook, is there any way we should think about the quarterly cadence of volume growth implied in the guidance? Do you still expect kind of sharper year-over-year volume declines in the first half and then kind of inflecting into the second half? Or any kind of finer point you can put on that?

As we look at it, and I think part of what you heard us say earlier, we're back to the point that we put in full guidance again. So I think that gives you a sense that we've all found a way to manage through this. And I think to that end, Anthony, what I would suggest is a normal rhythm and cadence is probably broadly the right way to think about this. I do think there's going to be a degree to which you'll see some of it that's going to be modestly more in the back half as opposed to the front half. Obviously, Q2 and particularly Q3 were the two quarters that were most impacted by COVID. By the time we got to Q4, in many respects, we had a lot of this figured out. And certainly, we had more favorable weather in Q4. So I would look broadly at a rather normal rhythm and cadence, slightly heavier toward half two as opposed to half one. I hope that's helpful.

That's very helpful. And then, I mean, to your point, the volumes have held up better-than-expected over the last 12 months. In terms of what could get you to the high end or the low end of that 1% to 4% aggregates volume guide, is private commercial the biggest question mark for you? Or do you think residential could slow down in the second half? Or are there any particular states? Just wondering if there's maybe a few swing factors for you when you think about 2021 that could get you to the high end or the low end?

That's a great question. I think we've got a good sense of what public is going to look like, and we think public is going to look better. And I think we have a good sense of what residential is going to look like, and residential is going to look better, particularly single-family. We believe single-family as a percentage of overall housing will return to more normalized percentages. In other words, it's going to be about 80% of housing in the United States. And when we see single-family housing at one million starts or 1.1 million or 1.2 million, that's a pretty healthy place for our business. Because here's what happens. That's evidence of new neighborhoods being built. And so if you think about two cities that are important to us, think about Atlanta and think about Dallas, both tend to be North-South cities, both tend to be growing more North than South. So what that means is, years ago, you were growing North from Dallas to Plano, now you're growing from Dallas to Frisco and now you're going to be moving North from Frisco to North of Frisco. As we see new communities come in in Frisco or as they go into Alpharetta or other places North of Atlanta, new communities need the follow-on effect that you get in non-residential. History tells us, depending on geography, that can have a six to an 18-month lag behind it. If we're seeing single-family growth in communities and you've got a six-month lag on that, that can start pushing you toward the higher end of our volume guidance. Because if we think about the different end uses, residential and infrastructure are going to be better. Residential is going to be better, particularly single-family. As we land on non-residential, the toughest of the three end uses, we believe the heavy side of that is going to be good with warehousing, data, et cetera, all of which are very aggregates-intensive. So some of the swing to the upper end of that is going to be relative to the drag along effect of the light portion of non-residential that we believe will follow continued single-family growth.

Our next question comes from the line of Jerry Revich from Goldman Sachs.

Ward, I'm wondering if you could talk about how active your M&A pipeline is at this point? And how much is uncertainty around what tax rates could look like? How is that playing into your appetite for M&A and the overall impact on the M&A market as you see it?

Jerry, thanks for the question. If you look at what M&A has done for Martin Marietta through the SOAR years, and by that I mean from 2010 to today, M&A has been our preferred methodology of growth. It has served us and our owners well. We think it will continue to serve us well. When we think about M&A, we think about it in a long-term strategic view. At the same time, we're not going to go into transactions that we know are not going to be near term attractive deals for us either. In fairness, typically, we're not going to take tax rates much into account in the way that we're looking at M&A. Because we feel like getting the right deal in the right market is the most important thing that we can do for our company near term and long-term. It allows our teams to grow. It allows our company to grow. It lets us grow into markets that we think will be attractive and where we believe we can have leading positions. As you'll recall, we have a leading position in 90% of our markets today. Ten years ago, we had a leading position in 65% of our markets. We're going to be looking at M&A through two different lenses. We're going to be looking at bolt-on acquisitions in markets that we currently exist in. But equally, we will look at potential platform acquisitions in markets in which we would like to grow. As a reminder and we've not been shy about this, we've long talked about the 2050 regional planning that shows what growth is going to look like in the United States between now and 2050. The short answer is the country is going to add about 140 million people over that time period, and 70% of them will land in one of 11 mega regions. If you watch the mega regions and see where they are and if you look at our footprint, the likelihood is we will continue to want to be focused in those mega regions, either with bolt-ons or with platforms. Relative to our M&A pipeline and our team, they would like to sleep more. But the short answer is they're very busy people right now. They are very talented people. And our intention is to do all that we can to keep them tired and hungry.

Our next question comes from the line of Nishu Sood from UBS.

I wanted to ask about this. It has been an unusually volatile time for the industry, coming off a quarter in which volumes were heavily affected by the pandemic. Do you think there was any impact in the fourth quarter from deferred projects being completed then? And with milder weather that would have been conducive to that, do you think it affected the fourth quarter?

Nishu, great to hear your voice. With respect to your question, I'm sure we would be naive not to assume that there was some that would have been pushed into Q4, simply because Q3 would have been more impacted and the weather was favorable. So I think that's certainly a possibility. What I think we saw more of though is the build of some momentum and saw nice momentum going into Q4. Experience tells me that contractors finishing a year in which they don't have good confidence in the next year tend to slow down rather than hurry up because they want to make sure that they have plenty of work for their workforces as they come into a new year. So I think that's certainly possible, Nishu, but I equally think what we're seeing, particularly relative to single-family housing and what's tending to follow it and then the overall health of the DOTs in the states in which we are operating, I think those are coalescing to give nice momentum in Q4 that we believe persists into 2021.

Next question comes from the line of Phil Ng from Jefferies.

Ward, can you provide a little more color on bidding activity and how your backlogs are shaping up broadly? But certainly, any color, particularly on non-res and maybe some of these energy projects that you have talked about in the past that may have gotten pushed out, are you seeing some of that come back as well?

Phil, thanks so much for your question. What I would say is the customer backlogs are looking fairly similar in many respects to where they were last year. One thing that's worth remembering is backlogs at this time of the year for customers only represent about 20% to 35% of what people really think their shipment needs are going to be. Overall aggregate tons are modestly up as we talk to our customers right now. If we look at cement tons, they're actually up double-digits right now. If we look at Magnesia Specialties, they're actually up double-digits as well. Two parts of our business that have historically been very good—North Carolina and Magnesia Specialties—did not have the best years in 2020 and are both looking at considerably better years coming into 2021. So overall backlogs look really quite good for us. The only area that our backlogs are notably off would be in portions of Colorado. And what we're seeing in Colorado is actually right now a very good level of bidding activity in that state. We're coming off what was a record year in Colorado, and we anticipate coming into 2021 that would almost have to be modestly slower. With some of the COVID money coming to Colorado, DOT numbers are broadly even, and now we're seeing much better bidding activity. So I try to give you what we feel like is a good march across the enterprise to give you a sense of where we think customer backlogs are.

Any color on the new projects you've talked about that got pushed out maybe?

Yes, the large energy projects—it's going to be interesting to see because we're seeing energy pricing come back in ways this year that we anticipated. Until we started seeing that we were likely to see a slowdown on those jobs. We think we're likely to see those take off more in 2022. We had recently picked up some volume on one of those projects in South Texas. So again, I think there are no big surprises, and there's nothing markedly different than we spoke of as we really ramped up the year last year, although it does look near term modestly brighter on some of the commitments that have been made over the last few weeks.

Our next question comes from the line of Courtney Yakavonis from Morgan Stanley.

Maybe if you could just comment on within the quarter what infrastructure and residential were up. You mentioned North Carolina being down, but can you just comment what it was in the fourth quarter by end market? And then in light of the comments that you would expect more typical seasonality for the first half versus second half next year, can you just help us think about if there's going to be any difference between how you would envision those end markets returning to growth next year, if it shall be starting in the first quarter? Or some of those will be more back half loaded?

Courtney, welcome. I'd rather talk about from a full-year perspective. Infrastructure ended up last year at about 36% for us. Non-residential was 36% and residential was 24%. That gives a snapshot of what volumes looked like for the year. I think 36% for infrastructure is low; it ought to be in the low to mid-40s. If our states continue investing the way they are and we see a long-term bill from the federal government, we think that 36% moves up toward the 40% number. Non-residential at 36% is unusual. Historically non-res would have been about 30% of our volume, split about half light and half heavy. This year the heavy portion of non-res has been very strong—data warehousing and similar projects are extremely aggregates-intensive and have helped fill tonnage that otherwise would have been lost from hospitality and retail. Residential at 24% is relatively high; it's probably the highest single residential percentage we've seen. But within that, single-family was only about 67% of overall housing during the recovery; long-term averages are closer to 80%, and we're seeing that move back toward 80% now. So as we think about '21, infrastructure should move up, non-residential may shuffle a bit, and residential should be fairly consistent. Also, railroads intend to return to relatively normal levels of maintenance and repair, which helps our ChemRock and Rail business. I hope that was helpful.

Our next question comes from the line of Garik Shmois from Loop Capital.

Ward, given your optimism in new infrastructure spending going through in the middle of the year, some of the large growth figures associated with it, how should we think about the timing around the new funding showing up in your volumes? Is it unrealistic to think that it could be a 2022 driver or is it more 2023? And can you speak to the DOTs’ ability to handle such a potential step-up in funding? Is there enough capacity to handle increase in revenue?

Great questions, Garik. I would say several things. First, most DOTs today have utilized their engineering, planning and eminent domain resources over the last several years to be in a better position than at any time in my career to take funds and move with them. Part of that will be underscored by what they're going to do with the COVID relief dollars they've got as well. To give you a sense of the COVID relief dollars alone: out of the $10 billion, we're looking at approximately $900 million to Texas; $134 million to Colorado; $260 million to North Carolina; Georgia is getting $323 million; Florida is getting $473 million; Iowa, $123 million; Indiana, $238 million; South Carolina, $167 million; Maryland, $150 million; and Nebraska, $72 million. Those are meaningful sums. We think they will be put to work in 2021. If a highway bill passes by mid-year, you'll likely start seeing some pull-through in 2022, but we also believe 2022 will be a year where you see a nice build from these funds. This combination of potential federal funding, continued single-family growth and our targeted footprint sets the industry—and Martin Marietta—up for a potentially strong multi-year volume trend.

Our next question comes from the line of Adam Thalhimer from Thompson Davis.

Hey, Ward, when you think about M&A, how open would you be to buying a vertically integrated company versus pure-play aggregates?

Adam, good morning. It depends on the player. We're specifically driven by markets, what we think are attractive markets, the position that we would have in that market and what we think we can do with the business. When we moved into vertically integrated marketplaces historically, we did that in markets that were attractive and where integration made strategic sense. Always remember, this is an aggregates-led company. Wherever we're looking at M&A, you should expect it to be aggregates-led. There are markets in the U.S. that tend to be vertically integrated; if we want to be in those attractive markets, we need competencies in stone and, at times, ready-mix and hot mix asphalt. Would we consider vertically integrated businesses? Of course. But we'll be picky about the market. Our track record shows that when we do these deals thoughtfully, they add considerable shareholder value.

Our next question comes from the line of Paul Roger from Exane BNP Paribas.

Just a follow-up on the downstream side of the business. Historically, downstream pricing and margins tend to be more volatile than cement and aggregates. If hydrocarbon costs are going up, looking at your range and the middle of the guidance, it looks like you're expecting sort of flat margins this year. I just wonder if you can comment on what gives you confidence that that will be achievable, particularly in ready-mix?

Paul, good to hear your voice. If we look where our downstream businesses are, that gives us confidence. We have downstream in Colorado with ready-mix and asphalt, and downstream in Texas with ready-mix. In Texas we're seeing a good amount of bidding on private work tied into residential and public work on large projects. Colorado is one of the better ready-mix markets in the U.S.; ready-mix pricing in Colorado is substantially better than much of Texas. Our hot mix asphalt and paving business in Colorado is high barrier and strong. While some competitors are experiencing depletion scenarios on stone in portions of the front range, Martin Marietta is not affected; we have long-term reserves and a well-distributed system. We believe these factors allow us to maintain margins in downstream. At the same time, raw materials costs are rising—partly because we're selling internal aggregates into these downstream businesses—and we will treat internal and external customers equitably when pricing internal transfers. That should support margins overall.

Our next question comes from the line of Stanley Elliott from Stifel.

With the change in administration, do you see anything working through the committees on the regulatory environment that would either add cost to the process, maybe slow down the construction markets at all? And then kind of a broader thought, with the discussions around a $15 minimum wage, not really for you all, but for the customer contractor, what sort of disruptions that might cause, if any?

Great question, Stanley. We haven't seen anything coming through right now that we feel will be widely disruptive. We expect more ESG factors to be built into bills; we're okay with that. Much of it will be geared towards safety activities—an area where we already perform strongly. In our sustainability report, you'll see that, of our 400 operations, only four contribute the majority of greenhouse gas emissions; we've set robust targets through 2030 and publish them annually. If regulatory changes increase costs, we typically see corresponding pricing adjustments commercially, so we can manage that. Currently, our customer base is not complaining about a lack of available employees. A couple of years ago there were trucking and labor shortages; right now logistics are working relatively well and contractors can execute their projects. So we don't see material disruption at this time.

You sure did. And you guys really do have a nice safety record. So congrats on that and best of luck the rest of the year.

Our next question comes from the line of Rohit Seth from Truist Securities.

Back in 2018, we had a pretty sharp spike in inflation in the second quarter. With fiscal stimulus today, there could be some supply tightness. How do you plan on defending your margins should that reoccur in the second quarter this year?

Thanks for the question. Across our footprint, the single biggest cost of goods sold is labor—our employees. Then you'll find other costs that tend to be 12% to 15% of COGS, like supplies, maintenance and repair. Over the SOAR years we've been consistent in how we deploy capital and manage maintenance. One item that could be a headwind is energy—specifically diesel fuel—which was a notable tailwind in 2020 and persisted into Q4. I'll ask Jim to speak specifically about diesel and land sale gains that will not repeat from 2020.

We currently forecast a headwind of $30 million for higher diesel in 2021. WTI is around $58 per barrel, similar to 2019 levels, so we're effectively back to that level of diesel pricing. That's already in the forecast. We're holding on to our margins from 2020 and slightly building on those. As it relates to land sale gains, we had very large gains in 2020—about $70 million of gains. Those were one-time and are not expected to repeat in 2021. As you model out your numbers, please treat 2020 EBITDA with land sale gains separated and not as a recurring item for 2021.

Understood. And then on transportation costs, I'm seeing trucking costs going up a bit. What are you thinking there? Is that just a nominal grower? Or are you seeing any above normal growth there?

I think we'll see fairly typical growth in transportation. We're not particularly troubled by that. For quarry sales, customers typically arrange transportation and take risk as material leaves our scales, so transportation dynamics are generally managed within customer arrangements.

Our next question comes from the line of Josh Wilson from Raymond James.

Most of my questions have been asked, but I did want to make sure I understood the Cement margin commentary. I understand the year-on-year comparability issues with the outage. But it looks like the margin actually declines between the low and the high end of your guidance. Can you elaborate on maybe if there's some costs you would bring back at businesses at the high end of your expectations?

From a cost perspective, natural gas is an input for fuel in our Cement operations. Natural gas was fairly benign in 2020; we're forecasting that cost to rise slightly in 2021, and that's where you're seeing the margin slightly degrade year-over-year. That is one of the factors behind the margin spread within guidance.

Practically speaking, energy overall for aggregates tends to be about 12% of COGS, with diesel about 8% of that. For Cement, energy is a much larger portion—on the order of 20% of COGS—so energy input cost increases have a bigger impact on cement margins.

And if I could just sneak in one other. Your CapEx guidance is about the same as you initially started in 2020. Is that a good long-term number as well as we think about the cash potential as we get into an infrastructure bill?

I think it is. We started the year at a similar level, then pulled back due to COVID uncertainty. We restored it for 2021. Eight to ten percent of sales is a rough proxy for our CapEx. So $450 million is a reasonable number and you can scale it as the business grows—CapEx will grow accordingly.

Our next question comes from the line of Timna Tanners from Bank of America.

I'm sure you'll talk about this at your upcoming Investor Day. But what sticks out to me is what you're going to do with strong cash flows going forward. Could you remind us of your priorities? It sounds like you're excited about M&A and have a little more CapEx. What does it take for the Board to consider more buybacks or an increased dividend?

Thanks, Timna. Our capital priorities haven't changed. First priority is the right transaction—M&A that fits strategically. We've positioned the company to be able to pursue attractive transactions if they arise. Next, we invest responsibly in the business with prudent CapEx. Third is return of capital to shareholders, which we do through a meaningful and sustainable dividend and opportunistic share repurchases. We've never cut our dividend, and in August 2020 we increased our quarterly dividend by 4% despite the uncertainties. When we combined with TXI, we issued shares and subsequently pursued buybacks to reduce dilution; about 15 million shares remain in our authorization. Our Board continues to focus on doing the right deal when it makes strategic and financial sense, while also balancing organic investment and returning cash to shareholders.

Our next question comes from Adrian Huerta from JPMorgan.

Most of my questions were answered, but very quickly on the first quarter. Usually we see volumes down sequentially 10% to 15% in the first quarter, but we're ending with a very strong Q4. Given what you've seen so far with activity, can we expect the same guidance we've seen in the past?

Adrian, good question. The dichotomy is that whereas last year many companies withdrew guidance, we're back to a more normalized state and have reinstated guidance. Our practice is to be careful about quarterly granularity. We'll provide more detail when we report Q1 results. That said, we ended the year with momentum and we expect to see it carry into the year. We'll discuss January and Q1 when we release the quarter results.

Next question comes from the line of Michael Dudas from Vertical Research.

You mentioned the $10 billion allocations to DOTs and some good numbers for states not in your top five. What are two or three states you look at that could generate positive surprises for Martin Marietta if funding flows more aggressively into those states?

Two states to particularly watch are Indiana and Maryland. Indiana had a fantastic year in 2020; our team there ran the business well. Indiana is getting about $238 million from the COVID relief funds and has a solid highway program. Maryland, especially after the Bluegrass transaction, also performed extraordinarily well and is getting about $150 million. Those states, along with our top five, could provide upside if funding levels accelerate.

Our last question comes from the line of Brent Thielman from D.A. Davidson.

Ward, on North Carolina public sector, given the deficit in lettings last year was significant, do you feel like you've already felt the brunt of that in the business? Are you anticipating spillover effects into 2021, recognizing it's in recovery and lettings have forecast to pick up this year? Just a sense of how you're thinking about spillover into '21.

Great question, Brent. We went into 2020 with some of the best backlogs we've ever had in North Carolina, which helped weather a challenging year. We've had no harsh winter weather in North Carolina recently, which avoided additional delays. We're seeing resurfacing projects, the $700 million from build NC bonds being used, and healthier bidding on top of existing backlogs. We feel we've been through the toughest period and expect the state to perform more in line with historical expectations in 2021 and beyond. That points to a brighter 2021 and 2022 for North Carolina. Well, thank you all for joining our earnings conference call today. Built on our solid foundation of past successes, we're confident in Martin Marietta's prospects to drive continued sustainable growth and shareholder value in 2021 and beyond. We look forward to discussing our first quarter 2021 results in a few months, and importantly, sharing our strategic priorities with you at our coming Investor Day on February 25. Registration details for this virtual event will be available soon. As always, we're available for any follow-up questions. Thank you again for your time, for your continued support of Martin Marietta. Please stay safe and stay well. Take care.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.