Logo of jester cap with thought bubble.

Image source: The Motley Fool.

Martin Marietta Materials Inc  (NYSE:MLM)
Q1 2019 Earnings Call
April 30, 2019, 11:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning, ladies and gentlemen, and welcome to Martin Marietta's First Quarter 2019 Earnings Conference Call. My name is Howard, 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, Investor Relations

Good morning, and thank you for joining Martin Marietta's first quarter 2019 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 Q1 2019 supplemental information that summarizes our quarterly results and trends.

As detailed on Slide 2, 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 website.

As a reminder all financial and operating results discussed today are for the first quarter 2019. Any comparisons are versus the prior year first quarter 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 Q1 2019 supplemental information and SEC filings.

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

I will now turn the call over to Ward.

Howard Nye -- Chairman, President and Chief Executive Officer

Thank you, Susan. And thank you all for joining today's teleconference. Martin Marietta's strong first quarter performance provides a promising start to what we expect to be another record year for our Company. Consolidated total revenues increased 17% to $939 million and earnings before interest, taxes, depreciation and amortization or EBITDA increased 28% to $159 million both new first quarter records. We also achieved strong gains in other key financial metrics, including 140 basis point expansion in consolidated gross margin and earnings per diluted share of $0.68.

Notably, shipment volume and pricing improved across the majority of our Building Materials business including robust double-digit growth in aggregate shipments, as more favorable weather allowed for an earlier onset to the construction season and our customers were able to begin addressing both prior year's weather deferred projects and current backlogs. Consistent with our expectations, public and private sector construction growth in our leading markets is outpacing the nation as a whole and supports our view of continued pricing momentum. These trends bode well for increased construction activity and position Martin Marietta for improved shipments, pricing and profitability, for the remainder of 2019.

We have consistently maintained that attractive market fundamentals, including continued employment gains population growth and superior state fiscal health will promote sustainable and long-term construction growth across our geographic footprint. Our first quarter results clearly demonstrated that robust underlying demand -- demand that failed to translate into higher shipment volumes in 2018, due to contractor capacity constraints, logistics disruptions and most significantly poor weather.

For example, our heritage Mid-Atlantic division, which includes the Carolinas, Virginia, and Maryland, benefited from strong pent-up demand and more favorable weather conditions. These dynamics, just to name a few, resulted in heritage aggregates shipments that eclipsed the divisions 2007 peak first quarter volumes. While winter weather traditionally limits the ability of outdoor contractors to perform work, modestly improved weather in the first quarter of 2019 provided contractors the opportunity to advance both new and delayed projects. The notable exception was in Colorado, the Company's second largest state by revenues. Colorado experienced one of its harshest winters on record in terms of precipitation and temperatures, limiting construction activity and negatively affecting the aggregates, ready-mix concrete and asphalt and paving businesses of our Rocky Mountain division.

Heritage aggregates shipments increased 12.5% led by double-digit volume gains in the Mid America and Southeast groups. Importantly, all divisions, with the exception of Rocky Mountain contributed to this robust shipment growth, demonstrating the strength of Martin Marietta's markets and breadth of accelerating demand. Heritage aggregates shipments to the infrastructure market increased 2% as modestly improved weather, particularly in the Southeast allowed customers to commence transportation related projects earlier in the construction season. Importantly, our North Carolina, Georgia and Florida operations saw increased infrastructure activity during the quarter following the recent acceleration in public lettings and contract awards in these key states.

Consistent with our expectations, when we established 2019 guidance, we believe public construction, particularly for aggregates intensive highways and streets is poised for meaningful growth in 2019 and beyond driven by funding provided by the Fixing America's Surface and Transportation Act or FAST Act and numerous state and local funding initiatives.

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 5 years. Increased state level funding through bond issuances, toll roads and tax initiatives is expected to continue to grow at a faster rate than near term federal funding, leading to additional growth opportunities for our Company. The infrastructure market represented 33% of our first quarter heritage aggregates shipments, which is below the Company's most recent 10-year annual average of 46%, but consistent with first quarter historical trends.

Heritage aggregates shipments to the non-residential market increased 33% as we continue to benefit from robust distribution center, warehouse, data center and wind turbine projects in key geographies including Texas, the Carolinas, Georgia, and Iowa. Looking ahead, our non-residential construction outlook remains positive with third-party forecasts including the Dodge Momentum Index, projecting healthy commercial construction activity, particularly in our southeastern and southwestern regions.

Additionally, large energy sector projects along the Texas Gulf Coast are expected to increase demand for heavy building materials. Throughout the balance of 2019, the Company will continue to supply products for three previously awarded energy projects, five additional projects are pending regulatory approvals or waiting contractor and/or supplier selection and are expected to begin in earnest in 2019 and continue for several years thereafter.

Martin Marietta is well positioned to provide the aggregates, cement and ready-mix concrete needs for these multi-year projects. The non-residential market represented 37%, our first quarter heritage aggregates shipments. Heritage aggregates shipments to the residential market increased 8% driven by weather deferred home building activity in the Carolinas, Georgia and Florida. Despite the recent slowdown in housing unit starts at the national level, the residential outlook across Martin Marietta's geographic footprint remains positive, driven by favorable demographics, job growth, land availability, steady interest rates and efficient permitting.

Currently housing unit permit growth for our top 10 states is outpacing the national average for all three residential categories, total, multi-family and single-family. In our view, the issuance of these permits represent the best indicator of future housing construction activity. The residential market accounted for 23% of first quarter heritage aggregates shipments.

To conclude our discussion on end use markets, the ChemRock/Rail market accounted for the remaining 7% of first quarter heritage aggregates shipments, volumes to this sector decreased 9%, reflecting lower balanced and agricultural lime shipments. Heritage aggregates pricing improved 4% following the implementation of annual price increases throughout the majority of our geographic footprint. We were able to achieve this solid growth despite unfavorable product mix from increased shipments of lower priced base stone, which reduced first quarter heritage average selling price by $0.29 per ton or 210 basis points.

Keep in mind an increase in base stone shipments is only unfavorable from an average selling price optics viewpoint. In fact, given that base stone is typically the initial material needed for early stage construction activity and higher priced clean stone shipments subsequently follow, we're encouraged by this trend.

Drilling down to geographical trends. We achieved heritage pricing growth of 3% for the Mid-America Group. This was accomplished through continued price discipline, offset by product mix from base shipments. Price discipline led to 6% heritage pricing growth for the Southeast Group product and geographic mix, particularly from weather impacted Colorado shipments limited West Group pricing growth to 3%.

Acquired operations shipped 3.5 million tons of selling prices, approximately 15% below the corporate average. As a reminder, beginning in the second quarter, results for the legacy Bluegrass operations will be classified as heritage for reporting purposes.

Cement shipments improved 7% driven by the strength of the Texas market, increased shipments of oil well products and the addition of our new Caney sales yard in Houston. First quarter cement pricing benefited from favorable product and geographic mix, increasing 4%. Annual price increases went into effect on April 1st, with widespread support in both North and South Texas. We believe our cement operations will continue to benefit from a tight supply environment in Texas as forecasted demand is expected to exceed domestic production capacity by 10% in 2019.

Turning to our downstream businesses. Ready-mix concrete shipments decreased 4% as Colorado's harsh winter hindered early construction activity in that state. First quarter pricing improved modestly for the ready-mix business in total, led by a 3% increase in Colorado. As a reminder, the majority of annual price increases became effective on April 1st, in both, Colorado and Texas.

Our Colorado asphalt and paving business lost production days from extreme winter weather, including freezing ground temperatures resulting in reduced asphalt shipments. First quarter asphalt pricing in Colorado improved 4%. Importantly bidding activity and customer confidence remains strong and we are highly confident in the strength of the Colorado market.

I'll now turn the call over to Jim, to discuss specifics of our first quarter financial results. Jim?

James A. J. Nickolas -- Senior Vice President and Chief Financial Officer

Thank you, Ward. The Building Materials business achieved record first quarter products and services revenues of $809 million, an 18% increase. And gross profit improved 39% to $118 million. Aggregates product gross margin expanded 550 basis points to 18%. Steadier and higher shipment and production levels provided improved operating leverage, which in conjunction with higher prices drove the majority of the margin improvement. As Ward highlighted, our cement operations benefited from strong volume and pricing growth.

However, despite this top line improvement, extended maintenance, outages, higher rail freight costs and reduced operating leverage from lower production levels led to 1,270 basis point degradation in product gross margin. Outages included planned and unplanned repairs at both cement plants and the acceleration of maintenance activity is originally planned for later in the year.

With over half of our 2019 planned maintenance completed, we are returning to normal production capacity at all kilns and are well positioned to benefit from growing demand and a robust bidding pipeline throughout the remainder of the year.

In late 2018, we initiated a restructuring of our Southwest ready-mix concrete business and are pleased with the initial results. These efforts contributed to the 100 basis point improvement in that businesses quarterly product gross margin despite relatively flat shipments and pricing. Magnesia Specialties continued to benefit from strong domestic steel production and increased global demand for magnesia chemical products, generating product revenues of $69 million, a new quarterly record.

Additionally, the business achieved record first quarter product gross profit of $27 million. Product gross margins held steady and attracted 38.5% thanks to price improvements and production efficiencies that helped offset increased sales of lower margin products and higher costs for supplies and contract services. Our consolidated results included the benefit of two non-recurring items. First, we reversed a $4 million purchase accounting accrual related to the TXI acquisition, which is recorded in other operating income net, as an increased earnings from operations. Second, we recorded a discrete income tax benefit of $13 million from a change in the tax status of the subsidiary from a pass-through entity to a C Corporation, which reduced tax expense for the quarter. Neither of these items should be extrapolated in a run-rate calculation.

Excluding the first quarter tax benefit and other discrete events, we expect our estimated tax rate for full year 2019 to range from 20% to 22%. As we look to the rest of the year, our capital allocation priorities remain unchanged, with the continued focus on creating shareholder value through value-enhancing acquisitions, prudent organic capital investment, and the opportunistic deployment of free cash flow through dividends and share repurchases. All while returning to our target leverage ratio.

Capital expenditures are expected to range from $350 million to $400 million for the full year as we invest in high return projects, focused on increasing efficiency to drive margin expansion. 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 share repurchases, as well as meaningful and sustainable dividends that were increased 9% last August. For the trailing 12 months ended March 2019, our ratio of consolidated net debt to consolidated EBITDA as defined in our applicable credit agreement was 2.7 times. While this remains modestly above the top end of our target leverage ratio, we expect to continue deleveraging and return to a target leverage ratio of 2 times to 2.5 times by year-end.

With that, I'll turn the call back over to Ward.

Howard Nye -- Chairman, President and Chief Executive Officer

Jim, thanks. To conclude, we remain highly confident in our outlook for the balance of 2019 and as outlined in today's release have reaffirmed our full year guidance. Remember, our outlook contemplates an improvement in weather conditions from the extreme conditions we experienced in our regions in 2018, but nonetheless wetter than historic norms. While, we were pleased with our first quarter performance and are confident in our outlook for the rest of the year, we believe it's premature to raise full year guidance based solely on these results.

As we have also noted, the first quarter results are typically disproportionately driven by construction activity during the last 2 weeks of March. We will consider whether it's appropriate to revisit our outlook later in the year.

We believe attractive population and employment trends combined with positive momentum from state departments of transportation and continued private sector gains will support sustainable construction growth in our key regions for the rest of the year and for future periods as well. In 2019, we anticipate the growth in our top 10 states to outpace the nation as a whole and contribute to positive volume and pricing trends across all of our product lines underpinning our confidence that our Company is on its way to posting another record year.

As Martin Marietta celebrates 25 years as a public company this year, we'll continue with the approach that is proven to be successful. Our focus on price discipline, strategic geographic positioning and prudent capital allocation and underscored by our commitment to safety. That's why we remain confident about Martin Marietta's ability to achieve continued profitability growth and create value for our shareholders.

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 or comment comes from the line of Kathryn Thompson from Thompson Research Group. Your line is open.

Kathryn Thompson -- Thompson Research Group -- Analyst

Hi, thank you for taking my questions today. First question is on ASPs. A two-part question, first, could you confirm that there was not as great of an inventory build in Q1 '19 versus last year because that certainly does seem to be the feedback from the field from the industry in general. And then the second follow-up with that, could you give more quantification of that commentaries that you have in prepared comments about greater mix of base stone, how -- to what degree did that impact Q1 either on percentage or basis points. What does it mean for visibility going forward for volumes and what does it mean for mix going forward?

Howard Nye -- Chairman, President and Chief Executive Officer

Good morning, Kathryn. This is Ward. Thanks for your question. Couple of things, one, yes, we did have actually inventory drawdown in the first quarter this year, so we did not have the build that you saw last year, so that's the first part of your question. I think the other part of your question is a really good one. And that's what I'm happy to try to address, because I think this is an important notion for us to really hit very clearly. If we're looking at the first quarter of 2018 relative to products that went out, here's the way I would encourage you to think about it, about 25% of our product last year was base stone, somewhere between 28% and 29% of it this year was base stone.

Last year, almost 52.5% of it was clean stone, this year 50%. Here's my point, Kathryn, if you're seeing more base stone go out today that's newer projects that are beginning from the ground up and are likely to last a longer period of time. At some point, you're going to put asphalt or concrete on top of base stone, so we're going to get those clean stone sales as they come through. Greater base stone sales in my view is longer term nice projects that portend well for the balance of 2019 and really I think start to tell a good story for 2020. But here's what's important to it as we go through that.

If we take a look at what our ASP on our heritage business would have been this quarter if we have had the same mix that we had last quarter, our ASP for heritage would have improved 6.1%. So that's a 210 basis point improvement. And we think seeing more base stone as attractive, we think that type of pricing growth our heritage business is also attractive. And I do think I responded to your question relative to the inventories as well.

Kathryn Thompson -- Thompson Research Group -- Analyst

Yes. A follow-up on the cement, just a clarification. Could you quantify how perhaps the dollar impact this quarter versus a typical Q1 or perhaps last year in terms of how higher maintenance cost was? And then you said there were some planned and unplanned, maybe just a little bit more clarification on planned versus unplanned maintenance.

Howard Nye -- Chairman, President and Chief Executive Officer

Let's say it this way, I'll ask Jim to help double-team on this. Let me start the conversation in this regard. As we came into the year, Kathryn, what I would say is, we anticipated having about $19.2 million worth of expense relative to the kilns during the course of the year. What we've done in the first quarter is we spent or invested $11.2 million of that. So if you look at what that looks like over a period of years, that's clearly accelerating a lot of that into the first quarter. And our thought process is several fold, but primarily driven by the notion we want to be in an attractive place to run the business very aggressively as we go into the pure summer months in that Texas market.

I'll ask Jim to speak very specifically to some of the dollars around maintenance, inventory and some other issues that do affect the financials.

James A. J. Nickolas -- Senior Vice President and Chief Financial Officer

Good morning, Kathryn. The breakout between maintenance expense was about $10 million more this quarter versus Q1 of '18. Of that $10 million higher expense $6 million of that was planned, about a little under $4 million, that was unplanned. That's about 10 percentage points on the gross margin side. The other items that impacted cement, let me just round out the whole cement gross margin walk for clarity. We did have -- because we sold -- we had good sales growth of shipments, but production was lower, given the downtime, we had to dip into our inventory in a deeper way, which resulted in a $6 million headwind for the quarter again versus prior year. Those were the two biggest impacts, maintenance and inventory drawdown.

The third item was increased freight was about $2 million as we had to supply two new distribution outlets. So there's about $2 million of the extra expense. Those are the three biggest items that impacted gross margin for the cement business.

Howard Nye -- Chairman, President and Chief Executive Officer

And Kathryn, what I would add on to that is obviously increased transportation is moving primarily into New Caney in Houston and moving out West to Odessa. So those are some additional charges that we actually view as very welcome.

Kathryn Thompson -- Thompson Research Group -- Analyst

Okay. And final just quick cleanup question on guidance and changed appreciate that Q1 seasonally just smaller contributor, we know that on average for the industry from the checks we've done, maybe 20% of your volume, but could you remind us perhaps on a historical basis, how much of earnings typically you had in Q1. And I guess the one thing I'm noticing, I just wanted to make sure that we're right on this, it looks like, for the first time a big difference this year versus last year, having all three end-markets, res, non-res and public growing. Could you just -- just for our sake just ensure that there is no change in conviction even as the numbers haven't changed, but is there any change in the conviction for the year? Thank you.

Howard Nye -- Chairman, President and Chief Executive Officer

Kathryn, thank you again. Look, we feel very good about the year and we feel very good about the start. As we said in the prepared remarks and we don't feel like it's the right moment to come back and revisit guidance at all yet. And to your point, if we look at a 5-year average, here's what I would tell you, 5-year average, which showed 19% of shipments of current first quarter, 19% of revenues in the first quarter, to your point very specifically, Kathryn, 12% of gross profit and around 12% of EBITDA.

So again, I think we're sitting in a very attractive place, everything that we see and everything that we hear from customers for the year looks wonderful at this moment and you're certainly not hearing anything that tends to be a lack of conviction from us on the full year.

Kathryn Thompson -- Thompson Research Group -- Analyst

Thank you very much.

Howard Nye -- Chairman, President and Chief Executive Officer

Thank you, Kathryn.

Operator

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

Trey Grooms -- Stephens Inc. -- Analyst

Hi, thank you. Good morning. So the first question I have is on aggregates incrementals. You guys saw an improvement and I think by my math, we're about, the incrementals were about 38%, 39% and I know it's difficult to look at incremental margins on a quarter-to-quarter basis, but you guys are I believe looking for full year to be around a 60% range. So can you talk about some of the factors impacting 1Q that may be won't be an issue in future quarters or how to think about the bridge and incrementals, margins for aggregates kind of getting that 60% range to the year.

Howard Nye -- Chairman, President and Chief Executive Officer

Good morning, Trey, thanks for your question. Couple of things. I do think it's important to hit just what you said. And that is, remember that 60% on average in the aggregates business, I want to make sure that we're talking about that. Obviously, Q1 is a little bit different because you don't have significant portions of the aggregates business that are really running the way that we do expect them to full -- full year. So, with that as a caveat, let me turn it over to Jim to walk you through some of the math on where it look like the quarter and how we think that shapes out for the year.

James A. J. Nickolas -- Senior Vice President and Chief Financial Officer

Yes, good morning, Trey. Two things that I'd like to point out, one the headline number is in fact 30% incrementals, but what -- that's missing is the fact that we didn't have Bluegrass in Q1 of '18. If you were to do a pro forma calculation including Bluegrass, the incrementals would go to 51%, so about a 13% improvement, just that simple math change.

In addition, we increased the tons we ship predominantly via rail in this quarter by 17% and that led to higher freight costs for the quarter, which would account for another 13% incremental points, getting us closer to 64%, just taking those two items into account.

Trey Grooms -- Stephens Inc. -- Analyst

Got you. Okay. And that's still the case, just kind of looking on a full-year basis is for the overall business to get back to that kind of 60% range. Is that -- that's the outlook for...

James A. J. Nickolas -- Senior Vice President and Chief Financial Officer

That's right. That's what we're still expecting.

Howard Nye -- Chairman, President and Chief Executive Officer

The overall aggregates business. That's correct, Trey.

Trey Grooms -- Stephens Inc. -- Analyst

Yes. For aggregate. Thank you. And then secondly on the infrastructure side, up 2% I think, which it kind of lag some of the other end markets and I think you are looking for infrastructure now to be up on a high-single digits. Can you talk about what you're seeing there on that end market and how we should see that progress as we go through the year, with that kind of coming out of the gate a little slower.

Howard Nye -- Chairman, President and Chief Executive Officer

Yeah, I guess what I would say Trey, in many respects, if you think about the way DOT specifications work, there is not going to be a lot of asphalt paving in particular in most jurisdictions until after you get by March 15. So again, if we're looking at the rhythm and cadence of the way that the year is building, we're not at all surprised by where infrastructure sits here at the end of the first quarter. I think if we go back to that commentary, I gave you early on about seeing more base stone, I think that's the type of work you're going to see being driven toward infrastructure this year.

And what I would say to is simply looking at the states that matter most to us and Texas is looking at $8.2 billion worth of letting this year. That's a very big job, very big number. And we're seeing a number of very attractive design build jobs in that state. If we look at Colorado that did not have a particularly great year last year, 2019 looks a lot better, they are looking at $2.2 billion DOT budget, versus $1.6 billion last year and the state even more recently has transferred $650 (ph) million of FY 2018 general fund surplus to transportation over the next couple of years.

If you look at NCDOT here in our backyard, full year 2019 letting estimate $2.8 billion to $3 billion. And again, these are very -- those are big numbers, that's a 35% increase over what we saw last year. And if we're looking at Georgia, they are looking at lettings of about $1.9 billion, that's 2x what we were seeing back in 2014. And if we're looking at what they're looking for in 2020, they've requested $2.1 billion in 2020, so that's a 10% increase. So I think back to your point, I think, seasonality is what has affected infrastructure as we've come out of the gate, we fully expected it.

The letting activity that we're seeing from the States is very good and the backlogs that we're hearing from our contractor clients are often at record levels. So again, I think we've got enormous conviction and confidence around where infrastructure is going this year.

Trey Grooms -- Stephens Inc. -- Analyst

Right, that's encouraging. And then if you look at, I guess last one from me was, you made a comment word about April 1st, pricing in cement. Can you remind us how much you guys went out with, and I think you mentioned lots of red support in North and Central Texas, just any other granularity around that. And I know you don't do a lot in Houston market, but just any, any other color on what you might be seeing in the Houston market?

Howard Nye -- Chairman, President and Chief Executive Officer

No, happy to try to help with that, I mean, number one, seeing pricing up in Q1 is just nice to see period because to your point, the price increases for us in that market place really not going to effect our April 1. And by the way same answer on ready-mix concrete. So what we're talking about right now, north Texas is somewhere in that $6 to $8 per ton, in South Texas $4 to $5 and that Houston and Central Texas probably in that $5 range, Trey, so again it gives you a good steady snapshot of what it looks like. And again, fairly consistent with what we've seen over the last years, pricing tends to be a little bit better in North Texas, a little bit weaker by the time you get to the Gulf for reasons that you understand.

Trey Grooms -- Stephens Inc. -- Analyst

Got it. All right. Thanks for all the color and congrats on a nice quarter.

Howard Nye -- Chairman, President and Chief Executive Officer

Trey, thanks so much. Have a great day.

Trey Grooms -- Stephens Inc. -- Analyst

Thank you.

Operator

Thank you. Our next question or comment comes from the line of Scott Schrier from Deutsche Bank. Your line is open.

Scott Schrier -- Citi -- Analyst

Hi, good morning. Thanks for taking my questions. Obviously non-res was a pleasant surprise in the quarter, you had significant year-on-year growth. And understanding that, it is a small quarter, but I'm curious if you could talk a little bit about. First, was there any impact from the Houston chemical plant incident and second, was this non-res performance in line with your expectations or did it outperform and was there some pull forward, just want to get a sense for what the bidding process looks and the cadence of the non-res, which seem to be a pretty good surprise in the quarter.

Howard Nye -- Chairman, President and Chief Executive Officer

Yeah, several things, I want to say Scott, now the Houston situation was not particularly a driver for that. If we come back and take a look at really what we're seeing in states that matter the most to us, non-res for us in North Carolina is up nicely, non-res for us in Georgia is up there very nicely. So I think that's a lot of it. If we go and look at the nature of some of the non-res, it's got a nice enduring quality to it. You've heard us speak over the last several years about warehouse and you've heard us speak about data centers, you've heard us speak increasingly about wind farms, that level of activity continues to be really quite strong in our footprint. So I think a lot of what you're seeing on non-res, number one, is not a surprise to us.

And number two is really driven by some states that population trends and employment trends have been very strong over the last several years, but volume trends haven't been as strong. And I think part of what we've been waiting for, I think much of what the investor base has been waiting for is to see states like North Carolina and Georgia really start to perform.

So remember one of the things that we've long talked about is the importance of that bottom right hand corner of the United States map to our business. And as we look at what one of the big differentiators were or has been in non-res for the quarter, that was a piece of it. The other thing that I would tell you and it's not so much a mover for the quarter, I think it's going to be a mover for the year. As we look at non-res, will be what's happening with those large energy projects in the Gulf.

As you recall we've been talking about a dozen-ish of those large jobs that are either in action or we believe coming into action in the not too distant future, today we've got two different jobs with Exxon and one at Cheniere LNG Train 3 in that marketplace and we think more coming during the course of the year. But back to your point, Scott, those were the primary drivers that we're seeing in non-res.

Scott Schrier -- Citi -- Analyst

Got it. Great. And then I wanted to ask another one on cement and cement pricing and your comments suggested that you have some confidence in the environment, but I just want to ask a little bit about that confidence in, especially in your Houston, where you've had imports as a rescue, some of the global cement trade happening that could influence multinationals willingness and ability to import, we see the emergence of some independent cement terminals coming online in Texas. So, I'm wondering how all of that plays into the environment for pricing in Texas, given that, of course, we know there is that supply and demand imbalance, but just want to see if that throws a wrench in the mix a little bit?

Howard Nye -- Chairman, President and Chief Executive Officer

Yeah, I guess, my comments would be two-fold. I think you finished with something that I think is an important point and that is, you do have supply demand imbalance there, you've got more demand than you have supply, number one. Number two, in many respects, with the exception really in one notable case, the people who are importing are also domestic producers in that marketplace. And if you come back and reflect on it, while Texas is in fact the only state in which we have cement, our cement operations strategy number one in Dallas and number two in San Antonio.

So if we look at the large cities in Texas, our drivers are really going to be DFW, it's going to be San Antonio. And then to a degree South Texas in Houston. So I would say the supply demand imbalance is very healthy from where we are. And I think the pricing environment is more attractive. I think the fact that really you've only got one non-domestic producer who is coming in at any moment keeps things in a very steady state, even in that part of the state right now. So again, if we're looking at how we view Texas cement this year, we have a very robust view of how that business is going to perform.

Scott Schrier -- Citi -- Analyst

Great. Thanks for that Ward, and good luck.

Howard Nye -- Chairman, President and Chief Executive Officer

Thank you, Scott.

Operator

Thank you. (Operator Instructions) Our next question or comment comes from the line of Nishu Sood from Deutsche Bank. Your line is open.

Nishu Sood -- Deutsche Bank -- Analyst

Thank you. I wanted to follow-up first on the aggregates pricing, on a mix-adjusted basis, the 1Q pricing was up around 6% year-over-year. So above the 3% to 5% that you're expecting for the year, are we already seeing some of the pricing tailwind benefit from the strong start to the year. And how would that, how do you, would you expect that to carry forward as we go into that the heart of the construction season?

Howard Nye -- Chairman, President and Chief Executive Officer

Nishu, I would say maybe modestly, you're seeing some of that. What I would say is, really if you think about the work that's going early in the year and most of it's going to be work that was put into backlog last year. So to the extent that things could be tighter in some markets before the end of year is over, I don't think you're necessarily seeing that benefit just yet. Again, I think the mix effect does mask what is the overall strength of the aggregates.

I also think that in the fullness of time, particularly in some of the Eastern markets, you're likely to see a bit more tailwind on that, but again if we're coming back and saying, how do we see pricing right now, did we feel confident within the guidance that we put out, yes, we do. And do we feel even better about the mix that we're seeing go out, I feel unquestionably better about that mix. The more base from my perspective, the better.

Nishu Sood -- Deutsche Bank -- Analyst

Got it. Great. And second question, as you were discussing the improvement in performance, relative to last year. One of the topics which you brought up again in terms of 2018 was the issue of contractor labor constraints. As we think about this year so far, it's still early in the construction season. But is your 1Q and the momentum coming out of the quarter evidence that some of those contractor labor constraints have begun to ease, or is it really more the weather, the early start to the construction season that you described in some parts of the country?

Howard Nye -- Chairman, President and Chief Executive Officer

Nishu, I think it's probably all of the above. Clearly, the weather was better, I think backlogs for customers were better. But if we look at construction employment too, it grew 3.4% in March of 2019 versus the prior year, and it's well above the national rate and building on a 4.3% growth last year and 3.4% growth in 2017. So we're simply looking at the sheer number of people who are now coming to work or coming back to work in construction.

It's growing, so I think number one that's gotten better. Number two, weather was better. I think the other issue is, we're going to have better logistics this year with both truck and rail. So I think a number of the bottlenecks that we saw last year are they going to be 100% gone this year, I'm not certainly not going to bet on that. Are we seeing labor better right now, for contractors than we saw a year ago? Absolutely, we are, which is why I come back and answer your question, I don't think it's one thing or the other. I think it's a confluence of factors that are actually working the way that we thought that they would.

Nishu Sood -- Deutsche Bank -- Analyst

Great. Thank you.

Howard Nye -- Chairman, President and Chief Executive Officer

Thank you, Nishu.

Operator

Thank you. Our next question or comment comes from the line of Phil Ng from Jefferies. Your line is open.

Phil Ng -- Jefferies -- Analyst

Hey, guys. Heritage pricing in aggregates and cement were very strong to start the year and as you kind of flagged a lot of increases you guys have in place for spring next don't kick in until April. So I guess based on what you've realized thus far and as that kind of flow through and trickle through over the course of the year, it seems like there is potentially some upside to that 3% to 5% of pricing that you've guided. Any color on that front would be helpful. And is there an opportunity, I guess if things are really tight and strong maybe certain markets you guys go for a second round in back half of the year.

Howard Nye -- Chairman, President and Chief Executive Officer

Yeah, it will be interesting, Phil. Again I think we're just, at this stage just sticking with the 3% to 5% on price. I do think there can be some places this year depending on how weather cooperates and otherwise it might get tight. Can I see some tightness in parts of eastern North Carolina? I think that's possible. Is it possible that you could see some tightness in some portions of Colorado? I think that's possible.

Is it possible that you might see some tightness in some parts of the Midwest? And I think that could be. So I think, we simply have to watch that. As a general rule, we don't talk much about the notion of mid-years until we get closer to mid-years. We discussed last year the fact that the contractors preferred to go ahead and see whatever the price is going to be early in the year and have some sense that, that's what it's going to be throughout the course of the year. I think that is typically what you're going to see, but I do think tightness can make some individual projects bid differently, as we get deeper into the year.

Phil Ng -- Jefferies -- Analyst

Got it. That's helpful. And Ward in your prepared remarks, you talked about how transportation activity in some of your key states like North Carolina, Georgia and Florida were starting to like pick up both from a letting standpoint. Just from a timing perspective, just want to get a better appreciation, you start seeing some of that flow through this year or is it kind of more of a 2020 event, and based on the backlogs you had coming into the year and how it's shaping up for 2020, you stack things up from a growth standpoint. Do you think things accelerate even more in 2020 or kind of pretty steady '19 versus 2020?

Howard Nye -- Chairman, President and Chief Executive Officer

I think you're going to see good pickup in '19 and part of what I'm taken by right now, Phil, and I haven't heard this as much in years past as I've heard this year. I've heard several contractors telling me early in this quarter -- by this quarter, I mean, Q1 in this instance, that they were already building work into 2020. So I think in many respects, the infrastructure that is there, that has been bid, that we know is coming, is in many respects baked for 2019. I think what you're looking at is, particularly on the public side, our level of bidding and letting activity, that I think at this point starts building into a very steady 2020 as well, I think your commentary on that's entirely correct.

Phil Ng -- Jefferies -- Analyst

Okay. Thanks a lot. Good look for quarter.

Howard Nye -- Chairman, President and Chief Executive Officer

Thanks, Phil.

Operator

Thank you. Our next question or comment comes from the line of Jerry Revich from Goldman Sachs. Your line is open.

Jerry Revich -- Goldman Sachs -- Analyst

Hi, good morning everyone.

Howard Nye -- Chairman, President and Chief Executive Officer

Hi, Jerry.

Jerry Revich -- Goldman Sachs -- Analyst

What I'm wondering if you can just expand on your pricing comments. So, like-for-like pricing is up 6% this quarter and I'm just trying to square that up with the comments on the full year guide and the discussion you just said a moment ago. I guess it sounds like from just a spot market basis alone, there should be upwards pressure to the guidance. So I'm just wondering, is it just back to your volume comment earlier on the call, is it too early in the year to revisit the pricing outlook or are we expecting the mix headwind to go from 200 basis points to 300 basis points.

I guess I'm trying to square that up, is it just a function of -- it's early to the year and that's you just see how next quarter develops versus now, the pricing you said, we have large work coming, that's at preset prices. Can you just help me square that up?

Howard Nye -- Chairman, President and Chief Executive Officer

No, I can't. And Jerry, I think you nailed it there in the middle. It's just too early in the year right now. We don't see anything that makes us lose our conviction on pricing. Pricing this year from our vantage point looks more attractive than pricing did last year. I don't see anything that's going to materially change that. I think your point is entirely on target and that is, it's the first three months of the year. And important markets like Colorado didn't even wake up because it's, I'd like to tell people they had a wonderful ski season and a really bad construction season this year.

So we're going to wait and see what this looks like when the entire business across our enterprise is really going. And the odd thing is, Jerry, that truly doesn't happen usually until the 1st of May because if you think about it, some of the Midwest is still simply coming out of a flooding circumstance as well. So it's certainly not due to any lack of conviction, we're just not going to get in over our skis after just three months into the year.

Jerry Revich -- Goldman Sachs -- Analyst

Okay, understood. And then in terms of the results from a non-res standpoint really strong in the quarter, is that just an easy weather comp in a certain area or did you win one of the major infrastructure projects in terms of LNG and chemicals, how much was that in the mix and your comment earlier just a clarification on the infrastructure piece. So when exactly do you expect based on shipment timing to see an acceleration toward -- from the low-single digit range that we saw in the first quarter toward the high-single digit run rate that you expect the balance of the year?

Howard Nye -- Chairman, President and Chief Executive Officer

Yeah, with respect to your first question, with respect to non-res, it was really more driven by just broad solid non-res activity across the enterprise. But as I indicated earlier on, you did see a couple of states that are seeing particularly strong non-res gains and again that's North Carolina and Georgia. So when we're seeing that, that does help us pretty considerably. To the second part of your question, no, there was not any particular big project in the Gulf or otherwise, that served to skew that or make it look more attractive. I just think we're sitting in a place that non-res for us is likely to be pretty attractive this year and it came out of the box in a good strong way. And I do think there has been some pent-up demand there, but I think there are also good backlogs that continue to be being built by our contractor base right now, Jerry.

Jerry Revich -- Goldman Sachs -- Analyst

Okay. Thank you.

Howard Nye -- Chairman, President and Chief Executive Officer

Thank you, Jerry.

Operator

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

Stanley Elliott -- Stifel Nicolaus -- Analyst

Hey good morning everyone, thank you for taking my question. A quick question on CapEx expectations, you've been spending above depreciation probably like four, five years now. How long should we think that that continues. Where do we think about kind of monitoring that back, first part. And then second part, maybe speak to some of the cost savings programs you'll have under way, I think which is probably due to some of the CapEx, that you've been running at a higher level.

Howard Nye -- Chairman, President and Chief Executive Officer

Stanley, good morning. Thanks for your question. A couple of things, you're entirely right. If we look over the last several years, we have been spending CapEx at above DD&A levels. And oftentimes we refer you to DD&A levels because that's not a bad number for you to keep in mind on what a stay in business CapEx number would look like. What I think you'll see is, if you look at the range that we set out for CapEx this year, it's actually getting closer to a DD&A level.

So you've actually seen that very naturally and gradually. And I would submit to you appropriately come down simply because we've spent some money in some very careful ways and the organization in many respects is just well capitalized today as it's ever been. What I'll do is, is turn it over to Jim to talk to you a little bit more about some of the specifics in the CapEx program. But I wanted to make sure to your point, that we're level-set relative to history. The fact that we were below DD&A during the downturn, about now getting closer to DD&A.

James A. J. Nickolas -- Senior Vice President and Chief Financial Officer

As we're mentioning our DNA is convergence with our CapEx spending by and large, five years ago, that wasn't the case, you're coming out of the recession, had to make up some lost ground, we've done that by and large. And if you look over time, our CapEx as a percent of revenues has ranged from 8% to 10% and we've been trending lower. So last couple of years, closer to 8% and we expect it to stay right around that spot. So we feel pretty good about that.

Some of specific projects we've got, we've got some large mine that we're moving underground has been ongoing, those should be ramping up in the next year or two. But we also want to keep some powder dry for opportunistic commercial activities if we have a chance to partner with a contractor in unique ways, we want to keep some dry powder for that. And we've been deploying and we'll be deploying some money on special projects that, a, provide outsized returns and b, help us ensure ongoing business with that contractor.

Stanley Elliott -- Stifel Nicolaus -- Analyst

Perfect. And then Jim, in your comments, you had mentioned, M&A, I mean, does that still seem to be kind of high-tech item for the Company right now. Or was that just kind of messaging more that you're consistent with kind of the capital redeployment strategy that you've had in the past?

Howard Nye -- Chairman, President and Chief Executive Officer

No, Stanley, I think if you go back and look at the capital allocation priorities, the right transaction continues to be at the top of the list for us. So for example, when we look at the way Bluegrass is performing for us, hitting the EBITDA margins that we thought we would see, we're seeing synergies nicely in advance of the 15 million that we had indicated at marketplace that we'd be getting, that's now a long way of saying the right transaction continues to be the number 1 capital priority for us.

Investing in the business is pretty close behind that and making sure that we have it well done and then returning cash to shareholders through a meaningful and a sustainable dividend and the share buyback. So those have been staples to our dialog over the last several years, and they continue to be and in that order.

Stanley Elliott -- Stifel Nicolaus -- Analyst

Perfect. Thank you very much and congrats on the strong start to the year.

Howard Nye -- Chairman, President and Chief Executive Officer

Thanks so much, Stanley.

Operator

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

Garik Shmois -- Longbow Research -- Analyst

(inaudible)

Howard Nye -- Chairman, President and Chief Executive Officer

Garik, I heard something, but I didn't hear your full question.

Garik Shmois -- Longbow Research -- Analyst

Sorry, can you hear me now?

Howard Nye -- Chairman, President and Chief Executive Officer

Yeah, I can. Thanks Garik. Good to hear your voice.

Garik Shmois -- Longbow Research -- Analyst

Yes. So I wanted to ask just on volumes in non-res in particular. How much of the volume, do you think might have been pulled forward into the quarter, and just given the favorable weather. And do you characterize any risk that have a vacuum in demand in the second half of the year, just given the earlier start to the season?

Howard Nye -- Chairman, President and Chief Executive Officer

I'm going to ask my partner in crime Jim Nickolas to respond to them (inaudible) circle back to you Garik.

James A. J. Nickolas -- Senior Vice President and Chief Financial Officer

Yeah, I think it's actually the reverse of being pulled forward, it's a bit more of a carryover from Q4 that there's been a slowdown and some weather impacted delays. So I think there's been a -- if there's any weather movement, it's benefiting Q1 from the Q4 we had. I don't think it's as much a pull-forward from Q2 or Q3.

Howard Nye -- Chairman, President and Chief Executive Officer

And Garik, I guess what I would say to is, I think it's possible that you might start seeing some tonnage go into those large energy projects this year that we do not have specifically committed right now. So I think if I'm looking at non-res across our enterprise, I echo what Jim said, but at the same time, I don't see something relative to activity or inactivity there that causes me any degree of concern or pause as we look out. I think non-res is going to be a very strong segment for Martin Marietta this year.

Garik Shmois -- Longbow Research -- Analyst

Okay. My follow-up question is just on inventories, you talked about the drawdown in Q1, I was wondering if there's any way, Jim, to quantify that in aggregates. And then as you rebuild inventories over the remainder of the year, how should that impact incremental margin? Should we perhaps realize incremental...

James A. J. Nickolas -- Senior Vice President and Chief Financial Officer

You're breaking up there, but I think I got the gist of your question, Garik. So, it did -- we did draw down inventories to some degree this quarter and that -- it was a mild, I call that a mild headwind. But as we build inventories in the remainder of the year that should act as a tailwind for us. So that should be helpful.

Garik Shmois -- Longbow Research -- Analyst

Okay. Thank you.

Operator

Thank you. Our next question or comment comes from the line of Timna Tanners from Bank of America Merrill Lynch. Your line is open.

Timna Tanners -- Bank of America Merrill Lynch -- Analyst

Yes. Hey, good morning everyone.

Howard Nye -- Chairman, President and Chief Executive Officer

Good morning, Timna.

Timna Tanners -- Bank of America Merrill Lynch -- Analyst

I wanted to ask, I know you mentioned that your cash use priority was debt paydown. But you did buy back shares in the second half of last year. And I was just wondering if you can remind us how you think about the timing decisions for buybacks?

James A. J. Nickolas -- Senior Vice President and Chief Financial Officer

Yeah. So we're focused on remaining investment grade and deleveraging as we stated, going about Bluegrass. But of course we resumed the share buyback in last, the last year and we're still on that path. Q1 seasonally low or light quarter for us from a cash flow perspective. So we held off, but we expect to resume in the rest of the year buying -- deploying some of our cash for share repurchases.

Timna Tanners -- Bank of America Merrill Lynch -- Analyst

Okay.

Howard Nye -- Chairman, President and Chief Executive Officer

And Timna, we try not to look at it just in a strictly rigid way either. We want to be realistic and when we can want to be opportunistic with it. So we try to look at it in a very clear-eye fashion.

Timna Tanners -- Bank of America Merrill Lynch -- Analyst

Okay. And then just wondering, if you have any of your -- if you could update us on your latest thoughts or what's your sources in Washington saying about funding sources for the next highway spending program. I know it's a little bit early but was just starting to -- we've been seeing more headlines about the two sides of the aisle perhaps coming together, different funding sources, whether it be gas tax increase or actually per vehicle kind of monitoring sources. So just wondering if you have any updated thoughts on how that's going play out?

Howard Nye -- Chairman, President and Chief Executive Officer

Well, I guess I know what you know and that is, I believe the President and Speaker Pelosi and Senate Democratic leader, Chuck Schumer, I think are supposed to meet today to discuss infrastructure. I think there's several things to watch. I think between now and clearly August is going to be an important time. Clearly you've got the US Chamber and others who are very focused on a near-term gas tax increase. And I think that's the important phraseology to put to it near term, because the simple fact is the United States is going to have to in the fullness of time move away from a gas tax and come up with other mechanisms.

I think those mechanisms include vehicle mileage tax on trucking. I think it can include electric battery taxes. I think it can include to a degree an indexed gas tax. I think the table is fairly open on what those can be. And I think what's going to be fascinating is to see how interested the Republicans and the Democrats are to actually work together on this. It is the one area that we believe there is bipartisan agreement. I think if they're going to get there, they need to get there sooner rather than later because once we get into election season, it gets increasingly challenged.

Timna Tanners -- Bank of America Merrill Lynch -- Analyst

I know the tough question asking you about politics, so I appreciate your thoughts on it. Thanks again.

Howard Nye -- Chairman, President and Chief Executive Officer

You're welcome, Timna.

Operator

Thank you. Our next question or comment comes from the line of Rohit Seth from SunTrust. Your line is open.

Rohit Seth -- SunTrust Robinson Humphrey -- Analyst

Hey, thanks for taking my question. Just -- one of the hot topics this quarter has been on the Mississippi River flooding and I know you guys have some exposure to Iowa, Nebraska and some of the neighboring states and your ChemRock/Rail volumes were a little bit weak. Just maybe you could speak on that and just give us a status of what's going on over there?

Howard Nye -- Chairman, President and Chief Executive Officer

You know, I guess, what I would say, you're right, there has been some flooding as you recall, we're not up and down really that Mississippi River market anymore, but we do have some flooding that has hit our businesses in the Midwest. Now when I say that, we haven't suffered in our quarries with flooding, but local communities have certainly suffered from it. And point I'll tell you too is, there is tonnage that's required to come behind these storms.

If we're looking at our current backlog or customer backlog in the Midwest specifically, it's 59% over where it was in the prior year. And that's a pretty big number. And a good bit of that has been some shot rock that has been required already to be used to help remedy some of the flooding and shot rock that we think will continue to be required over the next several months to do that as well.

So at least last year when Hurricane Florence came through, we had flooded pits in the Midwest. We do not have flooded pits, let me be really clear on that point. But I do think from a business perspective, it would generate some activity. It certainly creates individual pain and loss for families and our hearts and prayers and money and resource going out to them in many instances. But I do think that's where we sit relative to a business snapshot on that issue, Rohit.

Rohit Seth -- SunTrust Robinson Humphrey -- Analyst

Got you. Okay. And then on variable costs on diesel and asphalt, maybe give us a sense of your outlook on those over here?

Howard Nye -- Chairman, President and Chief Executive Officer

Yes, I mean, here's what I'll say. If we look at really where diesel was first quarter, expense was relatively flat on a 7.4% reduction in per gallon pricing. Now the difference was we also had 7.8% increase in usage simply due to Bluegrass. So we're just going to have to see where that goes for the rest of the year. We are not hedged on diesel. The primary hedge we have on that, as you recall over years has been relative to what we contend to do with respect to average selling price. But at least as we look at diesel in the first quarter, relatively well behaved.

As reminder, last year for the full year we used a little bit over 47 million gallons of diesel fuel and that was not having Bluegrass with us in the first quarter. Obviously liquid asphalt is up for the year. We think that actually probably works relatively well to asphalt pricing. And we've seen relatively flat natural gas pricing and that can matter to us, particularly relative to costs with respect to our magnesia specialties business. So again, we're looking at an overall input cost situation that we don't think is unattractive at all.

Rohit Seth -- SunTrust Robinson Humphrey -- Analyst

Got you. Okay. And then final question on, we talked about the base stone potentially impacting the mix, but you had really good heritage pricing in the quarter. Is the guidance inclusive of that mix headwind? So all in, good underlying pricing but potentially some mix of base stone?

Howard Nye -- Chairman, President and Chief Executive Officer

We do our best to look at the mix and see where we think it's going to be. We felt like because of the increased infrastructure that there would be more base activity this year. I think we probably saw a little bit more base activity earlier than we thought we would have. So we have done our best to apply in many respects what I hate to say is some art to that. So that's where we are obviously by the time we get to have here, we're going to have much better feel for it. But I think you get a sense of what the puts and takes are right now.

Rohit Seth -- SunTrust Robinson Humphrey -- Analyst

But then the base stone is not a margin headwind, it's just an optics thing, right?

Howard Nye -- Chairman, President and Chief Executive Officer

It is absolutely, positively an optics thing. That's entirely correct.

Rohit Seth -- SunTrust Robinson Humphrey -- Analyst

All right. Thank you very much.

Howard Nye -- Chairman, President and Chief Executive Officer

Thank you, Rohit.

Operator

Thank you. Our next question or comment comes from the line of Adrian Huerta from JPMorgan. Your line is open.

Adrian Huerta -- JPMorgan Chase & Co. -- Analyst

Thank you for taking my call and congrats on the results. Two questions if I may. One on M&A. If you're starting to see valuations getting more expensive for -- to acquire aggregate quarries. And my second question has to do with the Bluegrass prices, that they're really the -- we're already 15% below your prices and they seem to be at the same level. Do you see the opportunities for the coming quarters for that gap to close? Thanks.

Howard Nye -- Chairman, President and Chief Executive Officer

Adrian, good morning and welcome to the call and welcome to covering our Company. We're delighted to have you. And just a couple of things. M&A, what I would say is it completely depends. It depends on sellers' expectations, it depends on what we think can be done with the business. Do I think sellers' expectations have gone up as the industry has very modestly recovered over the last several years? Yeah, they have. But at the same time in the right markets are we able to find M&A transactions that can be incredibly value creating for our shareholders? The answer is yes.

Does it mean that you're going to have to be a bit more selective on some of those? I think the answer to that is, yes as well. We've tried to be really disciplined in what we look at, and we try to be really disciplined in our due diligence process. If it makes sense, we tend to move on it. I think if you go back and look at our history on transactions that we've done, they've tended to work very well. Now, what you don't see are the transactions that we've walked away from. So are they more expensive today? Yes, they probably are. Is the good value there to be found? Yes, they are.

Your other question is a perfectly fair one is, with respect to Bluegrass and how that looks relative to pricing. We've said in our headline numbers that their ASPs tend to be 10% to 15% below our heritage business. I think that's entirely true. I think what you'll see probably over the fullness of time is you'll see things probably move a little bit better in the nearer term in places like Georgia. I think you'll see them then move in medium term more in places like Maryland.

I think markets such as Kentucky, which simply does not have the type of robustness in many respects that you have in places like Georgia and Maryland will move upwardly and a little bit slower rhythm and cadence, but nonetheless, I think in a rhythm and cadence that will be value creating very appropriate, and by the way, from our perspective, not at all surprising.

Adrian Huerta -- JPMorgan Chase & Co. -- Analyst

That's great (ph). Thank you so much. Appreciate your feedback.

Howard Nye -- Chairman, President and Chief Executive Officer

Thank you, Adrian.

Operator

(Operator Instructions) Our next question or comment comes from the line of Michael Wood from Nomura Instinet. Your line is open.

Michael Wood -- Nomura Instinet -- Analyst

Hi, good afternoon.

Howard Nye -- Chairman, President and Chief Executive Officer

Hey Michael.

Michael Wood -- Nomura Instinet -- Analyst

(inaudible) you typically see some losses in asphalt, so that's not unusual, but there was no improvement since last year and last year, I know you, you were lagging the recovery of inflation. Can you just give us some color there in terms of what you're seeing on price cost and what pricing on asphalts looking like as the construction season gets under way?

Howard Nye -- Chairman, President and Chief Executive Officer

Yes, I guess, I'd say a couple of things to your point. Q1 volumes were down 29%, but winter had the biggest impact on that simply due to temperature and specification. So the front range had a real winter this year. It was colder, it was wetter. And clearly we felt that. If we're looking at pricing, Q1 asphalt pricing was actually up 4%. So we think that's a nice harbinger of things to come for the year. If we're looking at Q1 asphalt and paving backlogs and this is what I think is really important, Michael, they are up 60%. So, I mean, that's a very nice pipeline that we have on the business.

If we look at the way it's spread across the business too, that's important because in keeping with the commentary we've had on the call so far, Q1 infrastructure up 46%. Q1 res up 39%, Q1 non-res up 15%, all of these versus the prior year quarter again in that Colorado business. So, if we're looking at what the downstream business is looking like there, we think it really is very attractive. We talked about some of the cash flow issues the Colorado DOT had last year that we think that they've clearly found their way through.

So we're feeling very confident on that business right now. If we look at our overall infrastructure Q1 backlog in asphalt, it represents 50% of the total asphalt and paving backlog versus 46% last year. So it's not just that we feel like we've got good work ahead of us, we've got good work ahead of us in areas that we anticipated that we would have good work.

Michael Wood -- Nomura Instinet -- Analyst

Great. That's very helpful. And then, in terms of the Texas cement market, just curious, what is needed there in terms of growth for demand to outstrip domestic supply and roughly what can you tell us on the import price differential versus domestic pricing?

Howard Nye -- Chairman, President and Chief Executive Officer

I guess what I would say is, would there be room to add a few hundred thousand tons here or there in Texas? They probably could, at the same time, that's a marketplace that we're pretty happy with the way that, that marketplace is working right now. So we don't feel the need to add much to that. I would think the import in Houston -- the differential can be, let's call it low-20s delta on occasion, but then you've got transportation logistics that come into play once it gets there. So it can move around pretty considerably, Michael. That's a tough number to nail with precision.

Michael Wood -- Nomura Instinet -- Analyst

Great. Thank you.

Howard Nye -- Chairman, President and Chief Executive Officer

Thank you.

Operator

Thank you. Our next question or comment comes from the line of Adam Thalhimer from Thompson Davis. Your line is open.

Adam Thalhimer -- Thompson Davis & Co. -- Analyst

Hey, good morning guys. Nice quarter.

Howard Nye -- Chairman, President and Chief Executive Officer

Thanks, Adam.

Adam Thalhimer -- Thompson Davis & Co. -- Analyst

Hey, Ward, April was a little wetter year-over-year. Did that give you any pause vis-a-vis the guidance?

Howard Nye -- Chairman, President and Chief Executive Officer

Yes. I'll tell you the one thing that you've always seen us do is draw a really bright line between the quarter just ended and the new quarter that's starting, because I know if I ever say anything about it, then people will think, well, he's talking about it because he's good. And if I don't say something, they're going to extrapolate, he's not saying anything because it's bad. I would tell you, part of what you've heard us say is, we feel really good about the year right now, Adam, and I would -- I feel really good about the year.

Adam Thalhimer -- Thompson Davis & Co. -- Analyst

Okay, fair enough. And then, last thing, I was just hoping you could walk us around Texas. What are you seeing by the major -- in the major metros for this year?

Howard Nye -- Chairman, President and Chief Executive Officer

Look, I am happy to try to do that. Look, I think Dallas, Fort Worth is going to continue to be a really attractive marketplace. I mean part of what I like about that marketplace is it stays good on both the public and the private side. And we've talked about what's happening there relative to the large design build work that's coming, but here's what's important about that, Adam. I mean, you've got $1.6 billion worth of design build work around $635 million in Dallas, but -- and there's $520 million of it going on in Austin. There's $4.2 billion of it in Houston and $1.8 billion coming in San Antonio.

Actually, what I think we're going to see this year and we'd like this is we're seeing a much healthier Central Texas or San Antonio than we've seen over the last several years looking really at those marketplaces. That's been one of the tougher ones in Texas. And what's striking to me is still, if we're looking at employment metrics for the state, Texas is still ranked first as of March, '19 in employment growth versus the prior year. But think of it in these terms too, I mean, Texas with all the growth that it's had is still second in total housing permits and second in single family permits and number one in multifamily.

So when we look at all of that, then come back and say, what could the prospect of that state look like when these energy projects really come to some degree of fruition with 24 million tons of aggregates, 2.9 million cubic yards of ready-mix and 1.6 million tons of cement. These are all pretty striking numbers in a state where we've got the largest aggregates of cement and ready mix position in between Dallas, Fort Worth, Houston and San Antonio. So that's a long way of saying. Yes, I've listened to economists 4 and 5 years ago, say Texas was going into a slow down. Our team all looked at each other at the time and said, we don't see it, and we continue to see a very healthy Texas marketplace.

Adam Thalhimer -- Thompson Davis & Co. -- Analyst

Great. Thanks Ward.

Howard Nye -- Chairman, President and Chief Executive Officer

Thank you, Adam. Howard, are there any others in the queue?

Operator

I'm showing no additional audio questions in the queue at this time, sir.

Howard Nye -- Chairman, President and Chief Executive Officer

Well, thank you for joining our first quarter 2019 earnings conference call. With our steadfast commitment to safety, cost, discipline, and operational excellence, Martin Marietta is well positioned to deliver continued growth and enhanced shareholder value. We believe 2019 will be another record year for Martin Marietta and we look forward to discussing our second quarter 2019 results in July. 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 now disconnect. Everyone have a wonderful day.

Duration: 71 minutes

Call participants:

Suzanne Osberg -- Vice President, Investor Relations

Howard Nye -- Chairman, President and Chief Executive Officer

James A. J. Nickolas -- Senior Vice President and Chief Financial Officer

Kathryn Thompson -- Thompson Research Group -- Analyst

Trey Grooms -- Stephens Inc. -- Analyst

Scott Schrier -- Citi -- Analyst

Nishu Sood -- Deutsche Bank -- Analyst

Phil Ng -- Jefferies -- Analyst

Jerry Revich -- Goldman Sachs -- Analyst

Stanley Elliott -- Stifel Nicolaus -- Analyst

Garik Shmois -- Longbow Research -- Analyst

Timna Tanners -- Bank of America Merrill Lynch -- Analyst

Rohit Seth -- SunTrust Robinson Humphrey -- Analyst

Adrian Huerta -- JPMorgan Chase & Co. -- Analyst

Michael Wood -- Nomura Instinet -- Analyst

Adam Thalhimer -- Thompson Davis & Co. -- Analyst

More MLM analysis

Transcript powered by AlphaStreet

This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability.