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Martin Marietta Materials Inc  (NYSE:MLM)
Q4 2018 Earnings Conference Call
Feb. 12, 2019, 11:00 a.m. ET

Contents:

Prepared Remarks:

Operator

Good morning, ladies and gentlemen, and welcome to the Martin Marietta's Fourth Quarter and Full Year 2018 Earnings Conference Call. My name is Sonia, and I will be your coordinator today. At this time all participants have been placed in a listen-only mode. A question-and-answer session will follow the Company's prepared remarks. As a reminder, today's call is being recorded.

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

Suzanne Osberg -- Vice President of Investor Relations

Good morning, and thank you for joining Martin Marietta's fourth quarter and full year 2018 earnings call. With me today are Ward Nye, Chairman and Chief Executive Officer and Jim Nickolas, Senior Vice President and Chief Financial Officer.

To facilitate today's discussion, we have made available during this webcast and on the Investor Relations section of our website, 2018 supplemental information that summarizes our financial results and trends. As detailed on slide two, this conference call may include forward-looking statements as defined by securities laws in connection with future events, future operating results or financial performance. Like other businesses, we are subject to risks and uncertainties that could cause actual results to differ materially. Except as legally required, we undertake no obligation to publicly update or revise any forward-looking statements, whether resulting from new information, future developments or otherwise. We refer you to the legal disclaimers contained in today's earnings release and other filings with the Securities and Exchange Commission, which are available on both our own and the SEC websites.

Please note that all financial and operating results discussed today are for full year 2018. Any comparisons are versus the prior year, unless otherwise noted, and all margin references are based on revenues. Furthermore, non-GAAP measures are defined and reconciled to the nearest GAAP measure in our 2018 supplemental information and SEC filings.

We will begin today's earnings call with Ward Nye, who will discuss our operating performance, as well as market trends and expectations for 2019. Jim Nickolas will review our 2018 financial results. A question-and-answer session will follow.

I will now turn the call over to Ward.

Ward Nye -- Chairman, President and Chief Executive Officer

Thank you, Suzanne, and thank you all for joining today's teleconference. Martin Marietta's success is rooted in our commitment to our core values and the disciplined execution of our strategic operating analysis and review, or SOAR process. Today's reported results clearly demonstrate the benefits of our approach as we once again delivered record financial and safety performance, and did so without the benefit of meaningful shipment growth across our heritage Building Materials business.

For the full year, consolidated revenues increased 7% to a record $4.2 billion and adjusted earnings before interest, taxes, depreciation and amortization, or EBITDA, increased 9% to a record $1.1 billion. These outstanding results were driven largely by solid pricing gains across-the-Building Materials business and the Bluegrass Materials acquisition, the second largest transaction in our Company's history. We also established new records for net earnings and earnings per diluted share, excluding the one-time benefit from the Tax Cuts and Jobs Act of 2017, on prior year earnings.

As you've heard us say before, every facet of our business starts with safety. We're particularly proud to build upon 2017's record results to achieve the best heritage safety performance in our Company's history. Teams at our newest operations have also worked diligently to improve their safety performance, embracing our Guardian Angel and Wingmen cultures. Companywide, we achieved world-class lost time incident rate levels for the second year in a row. Elevated safety awareness across the Company has also reduced downtime from workplace incidents leading to higher revenues and profitability.

Our ability to repeatedly deliver record financial and safety performance validates the importance of SOAR and our successful execution of that plan, especially in light of last year's environment, where aggregates shipments on a comparable basis remained only modestly above 2010 trough levels. To emphasize Martin Marietta has continued to steadily improve key financial metrics, chief among them profits, even the shipment volumes, adjusted for acquisitions, that approximate great recession levels.

Importantly, we continue to strengthen our foundation for longer-term success through strategic geographic positioning, price discipline and prudent capital allocation. That's why we are more confident than ever about Martin Marietta's ability to drive continued profitability growth and enhanced shareholder value. In sum, we expect 2019 to be another record year for our Company.

What gives us that confidence for 2019? It's all about our geography and culture. Construction growth from the combination of emerging public sector activity and continued private sector strength in our key geographies should outpace the nation as a whole, driving improved shipment, pricing and profitability. Our geographic footprint is concentrated in areas with attractive underlying market fundamentals including notable employment gains, population growth and superior state fiscal health. These fundamentals should promote steady and sustainable construction growth for the foreseeable future.

Robust underlying demand, customer optimism and third-party forecasts also bolstered this positive outlook. Moreover, throughout 2018, we experienced strong shipment volumes on days not adversely impacted by extraordinary precipitation and/or extreme temperatures as further demonstrated during the fourth quarter.

These trends, combined with a favorable pricing environment, are clear indicators of underlying market strength and customer demand, underscoring the near-term growth trajectory of our business. Importantly too, we have the right teams, structure and organizational culture to leverage these positive trends for the great benefit of our many stakeholders.

Before we discuss in more detail where we're headed in 2019, let's quickly review full year 2018 operating results. We and our entire industry started last year with high expectations. Martin Marietta, along with our customers, peers and third party forecasters, anticipated accelerated construction activity. These expectations formed the basis of our original 2018 aggregates volume guidance of a 4% to 6% increase. Weather, contractor capacity issues and logistics disruptions, however, challenged both our Company and the sector throughout the year.

These dynamics precluded customers from meaningfully addressing their mounting books of business. As a result, heritage aggregates shipments adjusted for shipments from the Forsyth County, Georgia quarry, we divested in April 2018, in conjunction with the Bluegrass Materials acquisition, increased only slightly over 2017.

It's important to remember that these well chronicled headwinds are transient in nature and will ameliorate, serving to extend the construction cycle. The silver lining from these project delays is a notable increase in both customer and Martin Marietta backlogs as we head into 2019.

In 2018, heritage aggregates pricing improved 3%, in line with our expectations. This improvement was achieved despite the negative impact of product mix, which lowered the Company's full year average selling price by $0.13 per ton, or 1%. Underlying market demand should continue to support ongoing pricing momentum.

Acquired operations shipped 13 million tons at selling prices 10% to 15% below the corporate average, but in line with our expectations. We're pleased to report that integration is substantially complete and synergy realization has exceeded our expectations at the time of acquisition.

Full year cement shipments increased 1% as an extended maintenance outage at our Midlothian plant put us behind early in the year and was further compounded by record precipitation in Texas In February, September and October. Cement pricing increased 3%, consistent with our expectations. Our cement operations will continue to benefit from a tight supply environment as forecasted demand is expected to exceed domestic production capacity by 10% in 2019.

Ready mixed concrete shipments increased slightly in 2018, as weather dampened construction activity. Pricing improvement of 1.5% is best described as a tale of two markets, where solid pricing gains in Colorado were partially offset by product and geographic mix in Texas.

In Colorado, project delays and permitting issues negatively impacted our asphalt and paving business throughout 2018, as more contractors bid on both a reduced number of, as well as more geographically concentrated, Colorado Department of Transportation projects. This transitory situation should improve in 2019, with greater Colorado DoT funding and more dispersed public works. We remain highly confident in the strength of the Colorado market.

I'll now turn the call over to Jim, to discuss more specifically our full year financial results. Jim?

Jim Nickolas -- Senior Vice President and Chief Financial Officer.

Thank you, Ward. The Building Materials business achieved record products and services revenues of $3.712 billion. This is a 7% increase over 2017 and the Company's ninth consecutive year of revenue growth. Reported gross profit decreased and included a $19 million negative impact related to selling acquired inventory after it was marked up to fair value, as part of acquisition accounting.

The acquired Bluegrass operations contributed $149 million of product revenues and adjusted gross margins comparable with our heritage Mid-Atlantic and Southeast operations. Overall, aggregates product gross margin was 25.8%, a 230 basis point reduction compared with the prior year. Weather disruptions and higher diesel expenses, combined with lower inventory build and the acquired inventory adjustment negatively impacted our cost and efficiency profile.

As Ward mentioned, our Texas cement operations benefited from pricing and modest volume growth. Production efficiencies more than offset increased natural gas, freight and raw material costs, leading to a 100 basis point expansion of product gross margin to 32.5%.

For the third year in a row that Magnesia Specialties posted record revenues and profitability as the business benefited from strong domestic steel production and increased global demand for magnesia chemical products. Notably, international sales represented 35% of total chemical sales, up from 20% just four years ago. Pricing improvements and production efficiencies contributed to a 110 basis point expansion in product gross margin to 38.3%.

Consistent with SOAR, we continually evaluate our asset portfolio to ensure our business is positioned to generate industry-leading operational and financial performance. Accordingly, in December, we recorded a $12 million non-cash charge in other operating expenses for the West Group. This charge was related to asset and portfolio rationalizations within our Southwest ready mixed concrete business.

Martin Marietta continues to create shareholder value through value-enhancing acquisitions, prudent organic investment, and the opportunistic deployment of free cash flow through growing dividends and share repurchases, all the while returning to our target leverage ratio.

In 2018, we deployed $376 million of capital into our business. And we turned nearly $270 million to our shareholders through both an increased dividend and the repurchase of 522,000 shares of our common stock. Since the announcement of our share repurchase program in February 2015, we've returned more than $1.4 billion to shareholders through a combination of meaningful and sustainable dividends and share repurchases.

Through 12 months ended December 2018, our ratio of consolidated net debt to consolidated EBITDA, as defined in the applicable credit agreement, was 2.76 times, which is modestly above the top end of our target leverage ratio. Weather headwinds contributed to lower than anticipated fourth quarter EBITDA, and as a result, our leverage ratio was slightly higher than expected despite reducing debt by $90 million during the quarter.

For 2019 both higher EBITDA and additional debt repayments will drive leverage lower, placing the Company within its targeted 2 times to 2.5 times leverage ratio by year-end.

With that, I will turn the call back over to Ward to discuss our 2019 outlook.

Ward Nye -- Chairman, President and Chief Executive Officer

Jim, thanks. This year, Martin Marietta celebrates 25 years as a public Company. Building on our strengths, we're well positioned to deliver another record year. As outlined in our 2019 guidance included in today's release, increased infrastructure activity and continued private sector gains in addition to a full-year contribution from the former Bluegrass operations are expected to produce positive volume trends across all of our product lines and contribute to an even more favorable pricing environment across our footprint.

Following more than a decade of under-investment, we believe infrastructure construction activity, particularly for aggregates intensive highways and streets, is poised for meaningful growth in 2019 and beyond. The infrastructure market represented only 39% of 2018 aggregates shipments, well below the Company's most recent 10-year average of 46%.

Funding provided by the Fixing America's Surface and Transportation Act or FAST Act, combined with actions taken at the state and local levels, has resulted in an acceleration in public lettings and contract awards in our key states of Texas, Colorado, North Carolina, Georgia and Florida. Of note, we have not seen any meaningful delays in awarded contracts or construction spending resulting from the recent federal government shutdown. Our key states tend to be less dependent on federal support for highway capital projects.

Federal funding provides less than 50% of annual state DoT outlays for Texas and North Carolina, two of our largest states by revenues. The Texas DoT expects to let $9.6 billion in fiscal year 2019, up over $2 billion from the prior fiscal year. Construction growth in Texas will further benefit from large scale design build projects in and around Dallas-Fort Worth. The net Carolina DoT has over $4 billion letting schedule for fiscal 2019, of which, over half will be let in key Eastern Martin Marietta markets.

States continue to play an expanded role in infrastructure investment. Incremental funding at the state level through bond issuances, toll roads and tax initiatives should grow at a faster rate than federal funding, leading to increased growth opportunities for our Company. Our top 10 states, which accounted for 85% of total Building Materials revenues in 2018, have all introduced incremental transportation funding measures within the last five years.

Most recently, voters approved 79% of the state and local transportation initiatives on the November ballot, providing over $30 billion of targeted transportation funding across the nation. Rebuilding our nation's infrastructure is good for the economy, creates jobs and has bipartisan support. With the government now reopened, we're hopeful that meaningful progress will be made to advance federal bill with a comprehensive sustainable and sufficient funding mechanism to address our nation's unmet infrastructure needs.

Although we're not seeing any meaningful uplift in shipments in 2019 should an infrastructure bill be enacted this year and our 2019 outlook does not factor in any such benefit, new funding will provide better visibility for large-scale projects and further extend the construction cycle over the next several years. Martin Marietta's private sector activity in 2019 should benefit from full employment gains and population growth across the Sunbelt.

Non-residential construction activity, which represented 33% of 2018 heritage aggregates shipments, should increase in both the commercial and heavy industrial sectors for the next several years as we continue to benefit from robust distribution center, warehouse, data center and wind energy projects in Texas, the Carolinas, Georgia and Iowa. Both the Architectural Billings Index and the Dodge Momentum Index indicate healthy commercial and institutional construction activity in 2019.

Continued federal regulatory approvals of large energy sector projects in Texas, particularly along the Gulf Coast, should notably contribute to increased heavy building materials consumption, with construction activity on five projects to begin in earnest in 2019, and continue for several years thereafter. Martin Marietta is well positioned to supply the aggregates, cement and ready mixed concrete needs for these multi-year energy projects.

Residential construction, which accounted for 22% of 2018 heritage aggregates shipments, should continue to grow within our geographic footprint, particularly now that mortgage rates have stabilized. Our leading Southeastern and Southwestern states offer opportunities for gains in both multi and single-family housing, driven by available land, an overall business friendly environment and fewer regulatory barriers.

Permits are the best indicator of future housing construction activity. Currently, housing unit permit growth for our top 10 states, namely, Texas, Colorado, North Carolina, Georgia, Iowa, Florida, South Carolina, Indiana, Maryland and Nebraska, outpaces the national average for all three residential categories, total, multi-family and single-family.

On a national level, housing starts improved over 2017 levels, but remain well below the 50-year historical average of 1.5 million. Population growth, increased household formations, and low inventories, should continue to drive demand for residential construction.

In summary, for 2019, we expect aggregates shipments to increase 6% to 8%, with growth in all three primary construction end use markets. Specifically, infrastructure shipments are expected to increase in the high single digits, non-residential shipments are expected to increase in the mid to high-single digits, and residential shipments are expected to increase in the mid-single digits.

Annual price increases have already widely garnered market support, most importantly in Texas , the Carolinas and Southeast. To that end, we expect aggregates pricing to increase in the range of 3% to 5%. We expect cement product revenues to range from $400 million to $430 million, and gross profit from $130 million to $150 million as our cement operations benefit from underlying market fundamentals, weather deferred shipments, solid pricing momentum and new sales outlets.

Ready mixed concrete and asphalt paving revenues are expected to be in the range of $1.2 billion to $1.3 billion, and gross profit is expected to be $130 million to $150 million. The Magnesia Specialties business is expected to have another great year, with product revenues of $270 million to $280 million, and gross profit of $100 million to $105 million. These expectations reflect continued strength in global magnesia demand and domestic steel utilization. On a consolidated basis, we expect total revenues of $4.480 billion to $4.680 billion, and EBITDA of $1.170 billion to $1.280 billion.

To conclude, 2018 was a momentous year for Martin Marietta, with the best financial and heritage safety performance in our Company's history. Martin Marietta is confident in its outlook and prospects for continued growth and value creation. We believe our leading market positions, disciplined pricing strategy and successful execution of our strategic plan, have positioned our Company for continued success.

Attractive population and employment trends, combined with positive momentum from state DoTs should drive construction growth in our key regions that outpaces the nation as a whole and contribute to a favorable environment as we work toward another record year in 2019.

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

Questions and Answers:

Operator

(Operator Instructions) Our first question comes from Kathryn Thompson of Thompson Research Group. Your line is now open.

Kathryn Ingram Thompson -- Thompson Research Group, LLC -- Analyst

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

Ward Nye -- Chairman, President and Chief Executive Officer

Good morning, Kathryn. Thank you for the question. I think several things underscore our confidence. Number one is what we see simply emerging on infrastructure. If we look at what is going to happen in Texas and Colorado and North Carolina and Florida, those are big numbers this year. If we look at Texas. Looking at lettings of $9.6 billion this year. That's considerably over last year Prop 7 funding is $4.2 billion, Prop 1 funding at $1.3 billion, tremendous numbers.

If we look at North Carolina, $4.1 billion worth of lettings, and $2.3 billion of that in the Eastern North Carolina, which is an important state for us. Last year, Colorado really ran into a cash flow problem that they do not anticipate this year. Last year, they basically had $384 million worth of lettings. This year, $653 million, and next year, Kathryn, $964 million. So when we're seeing those types of numbers in the infrastructure, it really does give you a lot of confidence, particularly in those states.

But the other thing that I think we feel moved by is the strength that we continue to see, both in non-residential and residential. If we're looking at res, total permits in our states are up 9%, which is almost double the average in the US. Single-family is up 7%, again 2% better than the overall US and multi-family is up 15% in our markets. That's almost 3 times the national rate. So remember non-res in many respects will continue to follow that.

So if we think about what we believe has happened with infrastructure, returning to something that feels more like a 10-year average of (inaudible) over 45% of our business, a healthy non-res, good solid res, and then, we come back and look at simply what customers are telling us. So if we're listening to our customers, well, here is this, our customers along the Atlantic Coast have 3 million tons more work right now than they did last year. If we're looking in the Southwest, that number feels more like 15 million tons. And if we are looking at our aggregates business in the Rocky Mountains, last year at this point of time, they had about 50% of their revenues booked. This year more like 64%.

So we've got some very attractive numbers, but you asked the right question, Kathryn, that as how do you factor in weather. Here's how we think about that. We are thinking and planning for wetter than usual. We're not planning for apocalyptic, but we are planning for wetter than usual. We think based on the last several years, that's simply a sensible way to go about it and that's the way that we've tried to factor it. But emerging infrastructure, continued private sector gains, a full year of Bluegrass and modestly better weather is really the way that we're trying to capture the year. I hope that's helpful and responsive?

Kathryn Ingram Thompson -- Thompson Research Group, LLC -- Analyst

Yes, it is. And then, my follow-up question is more on free cash, as we look forward, could you discuss the free cash ramp for '19, what are the relative puts and takes and thoughts on uses of cash in '19? Thank you.

Ward Nye -- Chairman, President and Chief Executive Officer

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

Jim Nickolas -- Senior Vice President and Chief Financial Officer.

Good morning, Kathryn. As always, the first call on the capital is the right acquisition, that's -- there's no change, that'll be the case in '19 and beyond. We are reinvesting in the business. Our CapEx spending should be close to flat versus '18. We spent $376 million in '18, will be flat in '19, $350 million to $400 million, so same ZIP Code. And then, next as we march down the priority list, returning capital to shareholders. As Ward mentioned, we increased the dividend last August by 9%, much larger than our typical increase. I would expect something larger than typical this year, subject to, obviously, our Board approval.

And then, in '18, we resumed our share repurchase program. We bought back 100 million of our shares in '18. We will likely continue to repurchase shares in 2019 as well. And then, of course, we'll continue deleveraging by paying down debt. We're above our target leverage ratio and we're going to pay down debt until we get into that range. So those are the areas we're going to focus on. As you know, our cash flow is back half loaded, so that's when most of the cash deployment will occur. And is level set, some changes in '19 versus '18. We contributed $150 million in discretionary funds for pension plan in '18 that will not repeat in '19, and slightly offsetting that, we expect our cash taxes to be closer to $90 million in '19 versus something closer to $30 million in '18. So hopefully that answers your question.

Kathryn Ingram Thompson -- Thompson Research Group, LLC -- Analyst

It does. Thank you.

Ward Nye -- Chairman, President and Chief Executive Officer

Kathryn. Thanks a lot.

Operator

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

Trey Grooms -- Stephens Inc. -- Analyst

Hi. Good morning, everyone.

Ward Nye -- Chairman, President and Chief Executive Officer

Hi, Trey.

Trey Grooms -- Stephens Inc. -- Analyst

Ward, I know you guys are baking in the range of 3% to 5% pricing in aggregates, but can you give us any additional color on your view on pricing in aggregates, as well as on cement pricing as you look into 2019?

Ward Nye -- Chairman, President and Chief Executive Officer

Sure. I think it's going to be an attractive pricing year this year. One think that's worth saying, in the 3% to 5%, keep in mind when we bought Bluegrass, we said there pricing was about 10% to 15% below our heritage pricing. So when you're looking at 3% to 5%, remember that's fully loaded with Bluegrass's pricing in there that's lower than ours. So number one factor that in.

Number two, even if you're looking at the fourth quarter this year, and I think this is an important thing to remember from a momentum perspective, if you just look at it optically, you see pricing in the fourth quarter in the mid-2%s. If you take out some of the product mix that we saw in the quarter and what I really mean by that Trey is, we sold a large amount of sand in Central Texas and some sand in parts of North Carolina. That's simply a lower priced product. If we really even it out for product mix, we were seeing pricing, even in the fourth quarter, more around 4%, which is the same thing that we would have seen for the full year. So, keep in mind that was 4% in '18 on what was basically flat heritage volumes. We're going into year where I think volumes will be better. Obviously, we've done some transactions during the course of the year. So we feel very good about where we sit with pricing going into the year.

The other half of your question was relative to cement and how we see that and as a reminder, what we put out is an $8 a ton cement price increase, effective April 1. We feel very solid about that and where we sit on that today. And I think that's particularly true in North Texas. I think we feel fine about Central Texas, but I think we feel particularly strong about North Texas. One thing that's worth adding is, we have added some outlets to our cement business as well.

As you may recall, we build a new sales yard in South Texas, near Houston, at New Caney last year. We're selling both stone and cement at that facility. And we will be selling some cement in West Texas, out of Odessa as well. So again, we think we see a healthy pricing environment in both aggregates and in cement across our footprint. I hope that helps Trey?

Trey Grooms -- Stephens Inc. -- Analyst

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

Ward Nye -- Chairman, President and Chief Executive Officer

No. We're not. So the only impact that I would specifically call out is what I have already said, relative to Bluegrass, but it's separate and distinct from that, not so much Trey.

Trey Grooms -- Stephens Inc. -- Analyst

Got it. Okay. And then, my follow-up, looking at the guidance, it looks like you guys are assuming something around the 60% incremental margins range for the aggregates business, and I know that has been your outlook for the long-term incrementals in this business for a long time. More specifically, as we look into this year, can you talk about some of the key drivers, the puts and takes that you see in that ramp in profitability versus what we saw in '18?

Ward Nye -- Chairman, President and Chief Executive Officer

Yeah. Trey, if you go back and think about it, we actually came into '18 and we said the incrementals would not be at 60% coming into '18 for a host of reasons, including what was going on, we believe, geographically. What we're seeing this year is more of a typical return to the types of business that we would expect to see in the Carolinas, Florida, Georgia. Bluegrass, obviously, helps in that respect as well. So I think number one, if we simply look and see where some of the geographic positioning is going to be, we think that's helpful.

Number two, candidly, last year, when you had apocalyptic weather, it was tough at times to keep the cost profile under control the way we would typically like to. We see that being candidly more normalized this year. Energy was also spiky last year in some respects. We don't anticipate the same degree of spikiness in energy. And I think, we expect another very attractive here in Colorado.

One of the things that we've been able to do in Colorado over the last several years is really be very constructive commercially with what we're able to do with our aggregates business there. As you may recall, when we acquired that business, it was actually on the lower end of some our pricing. That's a tough market to get into, and we've been very constructive. We think we're getting fair returns in that market. I think that will help our incrementals as well.

Trey Grooms -- Stephens Inc. -- Analyst

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

Ward Nye -- Chairman, President and Chief Executive Officer

Thanks, Trey.

Operator

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

Stanley Elliott -- Stifel -- Analyst

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

Ward Nye -- Chairman, President and Chief Executive Officer

Good morning, Stanley. Thanks for the question. A couple of things. Yeah, look, I remember that $15 million synergy number too, so I'm right there with you. Stanley, we're going to do better than that. We're certainly tracking ahead of that. And I really need to complement our integration teams and people in the Mideast, Mid-Atlantic and Southeast, for making that happen. So if we step back and say, how has Bluegrass done? Bluegrass has done extraordinarily well.

When we were looking at the year last year, that was one of the wettest years in Maryland,a very wet year in Georgia and we're still seeing EBITDA margins from that business that were consistent with what we thought we would see going into the business. So we're excited about the way that that's working. , I think we're tracking ahead. Well I know, we're tracking ahead on synergies, so I'm pleased with that. So there is no aspect of that business that has been troubling or surprising to us. In fact, it's everything that we thought it would.

Looking forward, here's what I would say, Stanley, people look at a Company like ours or frankly others in the sector and part of what I spelled out in our opening comments is, we've been a public Company this year for 25 years. And during that 25 years, we have done quite a 100 transactions, but we are in the ZIP Code of having done a 100 transactions in this industry, and there is still room to go. And what I would say is, we've seen 25 years of consolidation. I think you still got another 10 years plus of seeing that type of activity.

Now the size and scope of it will always be -- it will ebb and flow and oftentimes, is going to be opportunistic. Well, those family businesses will sell for a host of reasons. They may sell because of succession, they may sell because of tax reasons, they may sell because of cyclical reasons. So, you never know going into a year exactly what you're going to see, but what I would say is this, financially, I think we are extraordinarily well positioned to continue to be a leader in industry consolidation.

And the other thing that I would say is, I think, in attractive markets that you'd like to see us growing, I believe we have the regulatory capacity to do that as well. So I'm not going to make predictions just yet on the sheer scope and size of transactions we may see this year. A couple of years ago I indicated I thought it to be a year of large transactions and mercifully I was right. Well, I think it will continue to be a year of transactions, but you know what, I'm going to say something like that for the next several years because I think it is simply right and true. Does that help, Stanley?

Stanley Elliott -- Stifel -- Analyst

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

Ward Nye -- Chairman, President and Chief Executive Officer

Thank you.

Operator

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

Nishu Sood -- Deutsche Bank -- Analyst

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

Nishu, first welcome to the call. We are delighted to have you following this sector and welcome you. With respect to your question, I think, it's a very good one. And a point I would say is, back to the notion, planning for a wetter than usual year. So I think that would temp things down a little bit otherwise, but I think the numbers still are attractive. Nishu, here are the things that really moved me as I think about it. When we go back and we talk about some of those numbers I mentioned before, looking at almost 20 million tons of business that customers say that they have at this time of the year that they didn't have last year, those are really big numbers. And most of that's driven by public work. And part of what you know about public work that's so different from others, when public work is committed, public work is going to go. So if we're looking at that degree of public work in Texas, in the Carolinas, in Colorado, in Georgia, in Florida, that really does give you a lot of confidence.

The other piece of it that I continue to think is moving is, we see good, steady non-residential light work, but also when we're looking at non-residential work, we continue to see what we feel like it's going to be pretty attractive work that's coming our way on the heavy side of that as well. And part of what we haven't spent a lot of time talking about are those large projects in the Gulf, but we've talked about a dozen or more of those projects. And what I'll tell you right now as we think about it is, three of them are already under way and we have them under contracts. There are five more that we see decisions being made on in 2019. If we just look at those five and that's Magnolia LNG, Golden Pass, Exxon has another big project down there, there is a LNG -- Rio Grande LNG and Driftwood. If we just look at those five and really tell you what those numbers look like, that's about 1.8 million cubic yards of ready-mix, it's about 8.6 million tons of aggregates and nearly 0.5 million tons of cement.

So anywhere we pivot right now, whether it's infrastructure, non-res or res on those big three, the numbers and the activity and what we believe is coming, looks pretty compelling. And when we go back and tally up what we feel like, it's some of the work that almost always in a year like we had last year gets pushed to the right, it doesn't go away. It just gets pushed to the right. I think those are the things that really underscore why we are at 6% to 8%, and again, we'll have to see how weather plays in there, but again, I think we've taken a very responsible view of weather. Is that helpful, Nishu?

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

Ward Nye -- Chairman, President and Chief Executive Officer

(inaudible) One, I would say, relative to what's going on with labor, let's talk about contractors and labor. The AGC put out a survey results here not long ago and 79% of construction firms are planning to expand their payrolls in 2019. So we think that's a very, very good sign that they recognize they have to (inaudible). And in many instances, they're simply going to pay more for it and that's something that we've anticipated.

With respect to logistics, we do see logistics getting better. We don't see them wholly going away, but we see them remarkably better. So Nishu, if you think back to it, one of the primary issues that we ran into last year was rails, and the movement of rail, because we moved more stone by rail than anyone else. And what I'll tell you is, the performance and the conversations that we've had, whether it's been with CSX or BNSF or UP, have all been very, very constructive and we see a better, a considerably better and improved transportation year in '19 than we saw last year.

You raised a good point relative to energy. And we'll talk about that for a second. Let me just give you a snapshot in Q4. Q4 relative to diesel and that is the biggest single slug of what we deal within energy, Q4 was $5.1 million higher, 23% above last year, on 11% more gallons. And of course, the gallons for us was primarily being driven by the acquisition of Bluegrass. But here's your snapshot and here's what I think is particularly relevant. If we look at January 2019 diesel prices, they were $0.33 below where they were in Q4. So as a fact of a matter, I think you're entirely right. We're going to have probably an easier build as we go through the year.

If you're really wondering how in the world we utilized that 47.5 million gallons of diesel, It's probably worth just noting, somewhere in the back, in Q1, we used 10 million gallons; in Q2, 12.7 million gallons; in Q3, 12.8 million gallons; and in Q4, 11.9 million gallons. The one thing that I would remind you, in Q1, we did not have Bluegrass. So what I'm trying to do is give you a sense, very directly to your question, what we see happening with labor, what we see happening to transportation and what some of the inputs are relative to fuel. I have probably given you 10% more than you bargained for, but I hope that was helpful.

Nishu Sood -- Deutsche Bank -- Analyst

That's great. Thank you for the details.

Ward Nye -- Chairman, President and Chief Executive Officer

Thank you, Nishu.

Operator

Thank you. Our next question comes from Garik Shmois of Longbow Research. Your line is are open.

Garik Shmois -- Martin Marietta Materials, Inc. -- Analyst

Thank you. I just want to ask about downstream and some of your margin assumptions in ready mixed and (Technical difficulties).

Ward Nye -- Chairman, President and Chief Executive Officer

Garik, are you there?

Garik Shmois -- Martin Marietta Materials, Inc. -- Analyst

Yes. Sorry. Can you hear me?

Ward Nye -- Chairman, President and Chief Executive Officer

I can hear you now. I'm sorry. You broke up only one second there. Can you repeat what you said?

Garik Shmois -- Martin Marietta Materials, Inc. -- Analyst

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

Ward Nye -- Chairman, President and Chief Executive Officer

Let's talk about a couple of things. We will hit asphalt first, then, we'll pivot over to ready mixed. So, if we are really thinking of asphalt and some of the key points that I think of as we go into the year, in 2019, we have got 30 asphalt projects that are planning about 1.2 million tons. And last year, it was more like 17 projects and about 549,000 tons. So what I would tell you, year-over-year, that's looking considerably better. What we have? If you recall, the only asphalt play we have, is up and down the Front Range in Colorado. So again it's a very refined play and we think we're in the right place for that.

One of the issues that I had outlined before is, Colorado DoT is in a very different place this year than they were last year. So, the planned advertisements, as they refer to them, their lettings as you and I would typically refer to them, that $653 million is well above last year's at $334 million. And again, part of what I had outlined before is, it's going to surge up to $964 million by the time we get to '20. So if we're looking at a backlog right now in asphalt and paving, it's up over 50% from where it was last year. So keep in mind, part of what I spoke to is that there were fewer but larger projects last year that had more people bidding on fewer projects. We see a very different situation in Colorado this year. And we think it's going to return to something that feels much more, as it would have historically, and more normalized.

With respect to ready-mix, I would say, two very distinct things. We have ready-mix in the Southwest. We have ready-mix also in Colorado. I mentioned in the prepared remarks that really it was a tale of two businesses, right. And that's why you were seeing attractive pricing in Colorado. You were seeing tougher pricing in parts of Texas. I think a lot of what was happening in Texas was in fact weather driven. All I would say in Texas, is this, we see strong infrastructure work in Texas. We've got nice looking backlogs there, good working places like the Grand Parkway in Houston, Hobby Airport, but the area that we think is going to be most moving in ready-mix this year will be in the non-res sector.

So for example, if we look in the Metroplex and you asked specifically by Dallas-Fort Worth, To give you a sense of it, school bonds in Dallas $1.5 billion, Dallas County: Tarrant County, which is Fort Worth $1.2 billion; Collin County, right there in the same area, $1.8 billion, and over 19 million square feet in the construction pipeline on just broad industrial distribution type work. We also see good steady residential working Dallas-Fort Worth and what we think is an improved res environment in San Antonio.

And the other thing that we've done is we've restructured that business a bit as well. So we consolidated five Texas districts into the same nomenclature you would typically hear is speak to in aggregates. You'll hear us talk about North, Central and South. So we think we've got a more attractive underlying business demand. We actually think the pricing situation is better there as well. And so what you'll see us doing effective April 1, is going out with varying degrees of price increases but tending to be somewhere between $5 and $10 a cubic yard. Garik, was that helpful?

Garik Shmois -- Martin Marietta Materials, Inc. -- Analyst

Yeah. That's very helpful.

Ward Nye -- Chairman, President and Chief Executive Officer

Okay.

Garik Shmois -- Martin Marietta Materials, Inc. -- Analyst

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

Ward Nye -- Chairman, President and Chief Executive Officer

One thing that I would encourage you to look at is the way that these different states deal with that very much themselves. And what you'll see is, number one, I think, we will have a successor bill to the FAST Act. So I don't sit here with a high degree of concern around what happens in that respect. The thing that I do think is most telling and helpful is to look more specifically at the way different states fund transportation differently and how much of what states are doing are driven either by the federal government's budget or state government's. And what you'll find when you look at states like Texas or North Carolina or Florida, is that, they are remarkably not dependent on what's coming out of the federal government.

In fact, I think some questions were put to people at NCDOT and others. And they said, OK, what would have happened had this federal shutdown extended? And NCDOT would have said, look, we could have kept going and we would have been just fine. So I guess what I would say, when we refer back to that nearly $30 billion worth of funding that was passed in November, when you look at that and consider that each one of our top 10 states over the last five years has put in additional funding mechanisms. And I still believe of all the things that the administration and the Congress can find common ground on, transportation infrastructure is still one of them. We look at that even beyond the expiration of the FAST Act right now and we do not have a high degree of concern around that, Garik.

Garik Shmois -- Martin Marietta Materials, Inc. -- Analyst

Okay. Thank you very much.

Ward Nye -- Chairman, President and Chief Executive Officer

Thank you, Garik.

Operator

Thank you. Our next question comes from Colin Barron (ph) of Jefferies. Your line is now open.

Philip Ng -- Jefferies -- Analyst

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

Ward Nye -- Chairman, President and Chief Executive Officer

Well, the primary thing that we think of on resi, Phil, is still really, what do the builder communities look like. And we're seeing a continued very attractive drive on that. So remember, it's not as much just building the home, it's the building of the subdivisions, so what's going into the road, what's going to the curb and gutter, what's going into the utilities. So again, if we're looking at our top 10 states and we're looking at permitting, and remember permits lead starts, so what we would see in permits in our leading 10 states is, they are up 9% versus the US kind of up 4%. So important gains in our top 10 in both single and multi-family activity and the singles is going to be something that we care deeply about. Eight of our 10 states are very positive on this, with Florida, Georgia, Indiana, even up double digits and both Texas and North Carolina are up 7%. So again, we see very attractive housing activity and we feel like that's going to continue to be our friend in 2019. Does that help?

Philip Ng -- Jefferies -- Analyst

Yeah. That's helpful color. And just sticking with the theme on the private side. I really appreciated the color that you provided on some of these bigger energy projects that you have in the pipeline for non-res, but curious, implicit in your guide, how much of that 30 projects that are kind of secured at this point are reflected in your guide versus some of the other projects you highlighted that could get a green light in '19, be incremental, provide some upside? And when we think about any of these projects, I would imagine they're going to be multi-year projects, but any color on how to think about how long do these projects usually last would be very helpful? Thanks.

Ward Nye -- Chairman, President and Chief Executive Officer

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

Philip Ng -- Jefferies -- Analyst

Okay. Thanks a lot. I appreciate it.

Ward Nye -- Chairman, President and Chief Executive Officer

Thank you, Phil.

Operator

Than you. Our next question comes from Jerry Revich of Goldman Sachs. Your lines that open.

Benjamin Burud -- Goldman Sachs -- Analyst

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

Jim Nickolas -- Senior Vice President and Chief Financial Officer.

Yeah. So, it's Jim. The primary driver, again, comparing versus prior year was the inventory build. We built inventory in Q4 of '17, that did not repeat in Q4 of '18, and that was about 3.3 million tons. So that was a $60 million headwind in a quarter alone. Now, I don't like really looking at this -- it's very powerful quarter to quarter, the inventory build change can swing results quite a bit. It did that this quarter. So it's transit in nature, but it did happen in this year.

The other big item we've got for this quarter, Q4 of '18, higher group medical insurance costs and to lesser degree higher workmen's comp. Again, that was up $10 million for this quarter versus prior-year quarter fourth. And I would say that's more of a -- we're more looking at Q4 '17 was pretty favorable comp for those who things, and so it's normalized in Q4 '18 this year. But from a comp perspective, it's a headwind.

Benjamin Burud -- Goldman Sachs -- Analyst

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

Jim Nickolas -- Senior Vice President and Chief Financial Officer.

Yeah. I think we had some -- in '18, we had some EBITDA wins with some settlements and some of the sales of property that helped improve our EBITDA. We don't expect those to repeat in '19. So that would account for the difference. Those were in EBITDA and net gross profit in '18. So that's why you're seeing difference in '19.

Benjamin Burud -- Goldman Sachs -- Analyst

Got it. Thank you.

Ward Nye -- Chairman, President and Chief Executive Officer

Thank you, Ben.

Operator

Thank you. Our next question comes from Adam Thalhimer of Thompson, Davis. Your line is now open.

Adam Thalhimer -- Thompson, Davis -- Analyst

Hey. Good morning guys.

Ward Nye -- Chairman, President and Chief Executive Officer

Hi, Adam.

Adam Thalhimer -- Thompson, Davis -- Analyst

First question aggregates pricing. Ward, do you think that building as you go through the year or do you think it jumps up in Q1 and just stays constant?

Ward Nye -- Chairman, President and Chief Executive Officer

No, I think, it can vary from market to market. I think there are a number of places that aggregates price increases are going into effect in April. So I think you'll see some movement there. I think there's always the prospect in different markets for mid-years depending on how tight specific markets get. I don't think we're in a position to talk specifically about where or whether those will occur, but I think as a practical matter, April is where I would start really pegging that type of movement Adam.

Adam Thalhimer -- Thompson, Davis -- Analyst

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

Ward Nye -- Chairman, President and Chief Executive Officer

Well, I would say a couple of things. One, remember where the ready mixed business is, right? So we had a very wet October. In fact, the wettest October in 124 years in Texas and that's our single largest ready-mixed market and what historically is a very large ready-mixed month. So you take a pop in the chops there from Mother Nature. The other thing that I would remind you is, the balance of our ready-mixed is really up and down the Front Range. So what I would tell you is, don't expect a lot out of ready-mix in Colorado in January, February and March.

So as you look at the business and it's natural build over the course of the year, given the fact that a decent bit of the business is Rocky Mountain driven, I would clearly be looking more to Q2, Q3 and early Q4 for that business. I did mentioned before, I think, we do have a more attractive pricing environment in Texas this year than we did last year. I think I mentioned earlier that effective April 1, we're looking in many respects for $5 to $10 a cubic yard that's going to help on the margin. And the other thing that I did mentioned before is, we have had some restructuring of that business and we've gone from five districts to three. So remember the aim is really to be in those mid-teens relative to margins in that business, Adam. So that's how I would think about that longer-term.

Adam Thalhimer -- Thompson, Davis -- Analyst

Perfect. Thanks.

Ward Nye -- Chairman, President and Chief Executive Officer

Thank you.

Operator

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

Craig Bibb -- CJS -- Analyst

Hi, Ward.

Ward Nye -- Chairman, President and Chief Executive Officer

Hi, Craig.

Craig Bibb -- CJS -- Analyst

In the presentation you referenced the improving backlogs and then in the Q&A you've talked about different components of where the backlog is going up. Kind of like what's the overall increase in backlog and revenue?

Ward Nye -- Chairman, President and Chief Executive Officer

We don't keep it in those exact terms, Craig. In many respects what I'm doing is trying to give you a snapshot of what we're hearing relative to our customers with respect to their backlogs. So what I'm trying to do is give a good snapshot of where those customers are saying, we've got big work that's coming, this is what the work looks like compared to where it was last year. And that's why I called out in particular over 3 million tons that customers who have articulated in the Mid-Atlantic division, 15 million tons in the Southwest, over 1 million tons in the Midwest and then I did talk to a degree about how much business has been booked in the Rocky Mountains this year versus last year. But I'd rather not go into specifics on revenue, et cetera. We'll talk about that as they play out during the course of the year. But I think underlying trends gives you a tremendous sense and vision of where the business is likely going.

Craig Bibb -- CJS -- Analyst

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

Ward Nye -- Chairman, President and Chief Executive Officer

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

Craig Bibb -- CJS -- Analyst

Okay. And then, with the three large projects in the Gulf Coast that are under way, and you have two more coming. When do the next to come in and should we be probably for volumes to accelerate and Q1, given you have a really easy comparisons?

Ward Nye -- Chairman, President and Chief Executive Officer

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

Craig Bibb -- CJS -- Analyst

Okay. And the three that are awarded when do they kick off?

Ward Nye -- Chairman, President and Chief Executive Officer

The ones that are awarded are under way. So again they would be in the guidance that we have out there today for you Craig.

Craig Bibb -- CJS -- Analyst

Okay. Great. All right. Thanks a lot guys.

Ward Nye -- Chairman, President and Chief Executive Officer

Thank you, Craig.

Operator

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

Mason Marion -- Nomura Instinet -- Analyst

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

Ward Nye -- Chairman, President and Chief Executive Officer

Yeah. I guess I would say a couple of things, Mitch. If you look at Bluegrass pricing in Georgia, frankly, relatively close to our heritage pricing in Georgia. If you look at Bluegrass pricing in Maryland, probably modestly below. If you look at the Bluegrass pricing heritage in Kentucky, it is below. So what we're doing is, we're going across the portfolio giving you a snapshot of what it looks like when you blend it.

Obviously, you can go back and look at the history that we had in earlier acquisitions. Clearly, we try to assure that we're getting good and appropriate value for our products. You saw that in the aftermath of TXI. So I'm trying to give you a sense of what our history has been on transactions like this and what these different geographies to look like. I think that probably leads you to the conclusion that you'd like to work toward.

Mason Marion -- Nomura Instinet -- Analyst

Okay. And then resi was weak in 4Q. Did you see a rebound in January, like some of the other resi service companies that have reported already and any areas that are particularly weaker or stronger? Thanks.

Ward Nye -- Chairman, President and Chief Executive Officer

Well, I would say, I usually talk about the quarter that we're in right now when we come back and report. So I won't go into a lot of detail on that. The one thing that I will share with you and you've probably seen it as well is, certainly, what I have heard from the homebuilders is that, they saw a pullback in Q4 when interest rates were more aggressive, but they have also said that they have seen a nice pickup since interest rates have stabilized and they have a more stable view going forward.

So again, I think if we go back and look at those resi numbers that we spoke of a little while ago and looking specifically at the permits. And before, we said, relative to national averages, I like where we sit, and it sounds like the homebuilders are at least telling publicly the type of story that tends to work very well for Martin Marietta.

Mason Marion -- Nomura Instinet -- Analyst

All right. Thank you.

Ward Nye -- Chairman, President and Chief Executive Officer

Thank you.

Operator

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

Brent Thielman -- DA Davidson -- Analyst

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

Ward Nye -- Chairman, President and Chief Executive Officer

Yeah, but I think it seen some delays, but we started to see much better activity, particularly in North Georgia last year. Remember that you've really got two different markets in Georgia. Market number one is Atlanta. Market number two is everything else. And I think what we're going to see this year is, we're going to see a better market in the Atlanta marketplace which we welcome because now we have a bigger footprint in the Atlanta market. Also South Georgia has been good and steady. The (inaudible) program that was put in place down there several years ago, has been very attractive in parts of South Georgia and the activity, particularly now that's being driven from the ports and a wider Panama Canal is helping that part of the State as well.

So remember Georgia is really Atlanta and everything else, and then the other market that's Georgia, is Florida, because again the granite in some respects, particularly in South Georgia that we're producing, finds its way into a very attractive Florida DoT market. So again, if we come back and say, what are the DoT states or states from a DoT perspective that are booking good? We would certainly put Georgia in that bucket, but we think places like Texas and Colorado and North Carolina are looking good. We think they're looking extraordinary.

Brent Thielman -- DA Davidson -- Analyst

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

Ward Nye -- Chairman, President and Chief Executive Officer

It's been an outsized percentage the last couple of years, in large part because places that should have been bigger percentage weren't at the normal percentages. So if you look at a place like North Carolina that's still considerably below mid-point, in a place like Georgia that's considerably below mid-point, in Maryland. It's considerably below mid-point. As those states recover, frankly, from a percentage perspective, it may -- it puts Texas in a much more normalized place. And number one, I think looking at a, as you say, bigger picture and more holistic fashion, I think that puts Texas in a better picture.

The other thing that I would remind you is, we're not all over Texas. I mean our footprint in Texas is uniquely driven by what's going on in that golden triangle, where you've got just such a disproportionate amount of people there. It's interesting. We had a large meeting of our top 100 employees in Martin Marietta several years ago and we had an economist who came in and the economist was absolutely positive that Texas is going into a recession several years ago. And what I will tell you is, all of our people who live and work and breathe in Texas and that's a lot of them by the way, looked at us and said, I don't where he is coming from, but we don't see Texas going into recession. We see that market the way that you do. We think it's very, very attractive. I agree it's beyond mid-point, but their population trends, their DoT budgets and otherwise, dictate that they should be there.

So we do not see anything in Texas that in any respect feels overbuild to us. So I think what I would tell you is, we like our Texas position and we like what we think is going to be a more return to normal for the Carolinas, Georgia and Maryland. And we think that snapshot puts Texas in a very appropriate perspective and I hope that was helpful. And I know that was long-winded and I apologize.

Brent Thielman -- DA Davidson -- Analyst

Thanks for the color, Ward. Best of luck.

Ward Nye -- Chairman, President and Chief Executive Officer

You're welcome.

Operator

Thank you. And our next question comes from Scott Schrier of Citi. Your line is now open.

Scott Schrier -- Citi -- Analyst

Hi. Good afternoon.

Ward Nye -- Chairman, President and Chief Executive Officer

Hi. What's up?

Scott Schrier -- Citi -- Analyst

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

Ward Nye -- Chairman, President and Chief Executive Officer

You know what, if you go back over the last several years, I think, Texas has had somewhere between really good pricing and good pricing, and in the spectrum of things, we will take anything and that ZIP Code. I think when you compare it to Colorado, one of the candid differences is barriers to do anything heavy side in Colorado really are very, very high. And I've commented to people before, there are three large granite quarries in Denver today, and in 30 years, there probably is still going to be three large granite quarries in Denver. And I think that drives some of the delta between the two.

What I would say is this, I think Texas will continue to be an out-sized performing market on volume, And I think, Texas pricing in the course of time continues to get better. And as I look at it, do I wish it was modestly higher? Sure. I think anybody would wish it was modestly higher, but unlike the trends that we've had there, I like the leading position that we have there. You know how we tend to look at a market, and if I'm thinking about the top 10 things or top 50 things that I worry about if it gives you any comfort, aggregate pricing in Texas is not on that top 50 worry list right now.

Scott Schrier -- Citi -- Analyst

Great. That's a helpful answer. And then my follow up I guess one for Jim. Wanted to talk a little bit about how you're thinking about free cash flow conversion. And I know, earlier in the call in Ward said that you have a business that throws awful lot of free cash. If I'm thinking about roughly $1.2 billion, $1.3 billion of EBITDA, the CapEx, the tax, the interest and historically, maybe you've been around that 25% to 35% free cash flow conversion, so do you think for '19, given all your guidance, are we in the $400 million range for free cash flow, or if I'm thinking about working capital and other things, is it possible to take it up to $500 million? Just trying to think about how to bracket free cash flow and what you're thinking from that perspective?

Jim Nickolas -- Senior Vice President and Chief Financial Officer.

I think your optimistic assumption is probably more accurate. We're going to be a pretty -- for 2019, we should have higher cash flow conversions, close to where you came out at.

Analyst -- -- Analyst

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

Ward Nye -- Chairman, President and Chief Executive Officer

Scott, thank you. As I said, we've been an embarrassment of riches when it comes to free cash flows. And you know what, we'll take that problem, it's a high-class one.

I want to thank you all for joining our fourth quarter and full year 2018 earnings conference call. Our steadfast focus on safety, efficiency and operational excellence positions Martin Marietta to deliver continued growth, success and superior shareholder value creation. We believe 2019 will be another record year for Martin Marietta, and we look forward to discussing our first quarter 2019 results with you in April.

As always, we're available for any follow-up questions. Thank you for your time and your continued support of Martin Marietta.

Operator

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

Duration: 72 minutes

Call participants:

Suzanne Osberg -- Vice President of Investor Relations

Ward Nye -- Chairman, President and Chief Executive Officer

Jim Nickolas -- Senior Vice President and Chief Financial Officer.

Kathryn Ingram Thompson -- Thompson Research Group, LLC -- Analyst

Trey Grooms -- Stephens Inc. -- Analyst

Stanley Elliott -- Stifel -- Analyst

Nishu Sood -- Deutsche Bank -- Analyst

Garik Shmois -- Martin Marietta Materials, Inc. -- Analyst

Philip Ng -- Jefferies -- Analyst

Benjamin Burud -- Goldman Sachs -- Analyst

Adam Thalhimer -- Thompson, Davis -- Analyst

Craig Bibb -- CJS -- Analyst

Mason Marion -- Nomura Instinet -- Analyst

Brent Thielman -- DA Davidson -- Analyst

Scott Schrier -- Citi -- Analyst

Analyst -- -- Analyst

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