Howard Nye – President, Chief Executive Officer and Chairman Anne Lloyd – Executive Vice President and Chief Financial Officer.

Kathryn Thompson – Thompson Research Lee Jagoda – CJS Securitie Jack Kasprzak –BB&T Capital Markets Jerry Revich – Goldman Sachs Chris Olin – Cleveland Research Company Trey Grooms – Stephens Inc. Garik Shmois – Longbow Research Ted Grace – Susquehanna Financial Group Stanley Elliott – Stifel Nicolaus.

Good day, ladies and gentlemen, and welcome to the Martin Marietta Materials Inc. Second Quarter 2014 Financial Results Conference Call. At this time, all participants are in listen-only mode. Later, we’ll conduct a question-and-answer session and instructions will be given at that time.

(Operator Instructions) As a reminder, today’s program is being recorded. I would now like to introduce your host for today’s program, Ward Nye, Chairman and CEO. Please go ahead..

Good afternoon, and thank you for joining Martin Marietta Materials quarterly earnings call. With me today is Anne Lloyd, our Executive Vice President and Chief Financial Officer. As we announced in our earnings release this morning, second quarter 2014 results reflects record net sales of $602 million and earnings improvement.

Net sales growth was driven by a 13% increase in aggregate’s product line shipments and a 5% increase in aggregate’s pricing compared to the second quarter of last year. Additionally, our specialty products business again achieved new quarterly records for net sales and earnings.

Importantly, the significant note that our growth was achieved in public and private sectors, a sign of economic stability and further recovery.

Our performance through the first half of the year, combined with positive trends in key economic indicators of construction activity has led us to raise our aggregate’s product line volume guidance for the year to an increase to 6% to 8% over 2013. Earlier this month, we successfully completed our acquisition of Texas Industries.

This transaction was overwhelmingly approved by shareholders of both companies and enhances our strategic position in major aggregates and concrete markets in Texas. It also provides us with participation in the growing cement markets in Texas and California at a very opportune time.

However before further discussion of the events of the quarter, let me remind you that today’s teleconference may include forward-looking statements, as defined by securities laws in connection with future events or future operating or financial performance.

Such statements are subject to risks and uncertainties, which could cause actual results to differ materially. Except as legally required, we undertake no obligation publicly to 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 our second quarter earnings release and our other filings with the Securities and Exchange Commission, which are available on both our own and the SEC websites. Also, any margin references in our discussion are based on net sales and exclude freight and delivery revenues.

These and other non-GAAP measures are also explained in our SEC filings and on our website. Now for additional commentary on our quarterly performance. We experienced aggregate’s product line volume growth in all of our end-use markets with notable strength in private construction.

Shipments to the non-residential market represented 31% of our volumes and increased 16% over the prior year quarter led by both energy and commercial sectors. We continue to benefit from our industry-leading position and participation in supplying building materials to the nation’s major shale energy developments.

We are also benefiting from growth in commercial construction driven partly by the ongoing residential construction recovery in a host of our markets.

The residential construction market which comprised 14% of our quarterly aggregate’s volume aggregate’s led private sector construction activity, shipments to this end-use increased 20% over the prior year quarter. On a year-to-date basis, housing starts are up approximately 7%, an encouraging sign for the durability of the housing recovery.

The ChemRock and Rail market comprised 10% of aggregate’s shipments and increased 13%. We were pleased to see a 9% increase in volume to the public sector which represented the remaining 45% of our aggregate’s product line shipments. Growth was notable in the west and southeast groups which experienced increases of 16% and 21% respectively.

The west group improvement was driven by activity in Texas and Colorado where state department of transportation budgets have been positively affected by the ability to secure alternative financing sources.

Texas volumes reflect the ongoing benefit of nearly $8 billion in multi-year transportation projects awarded by the State Department of Transportation in 2013. Our Colorado operations are benefiting from continued reconstruction efforts following last year’s historic flooding.

Additionally, earlier this year, Colorado approved its first public private partnership project to renovate and expand US highway 36 corridor. Growth in the southeast group reflects early signs of recovery in Georgia after many years of underinvestment.

The Georgia Construction Aggregate Association reports Metro Atlanta aggregate shipments increased 29% in the first half of the year and Georgia DOT aggregate’s consumption increased over 11% both compared to the prior year period.

Additionally, Florida Governor Rick Scott announced a $10.2 billion DOT budget for fiscal year 2014, 2015, the highest level of infrastructure investment in Florida’s history. This budget together with the state public private partnerships provides a solid multi-year outlook for infrastructure activity.

As we’ve often said, geographic location is critical and we believe we are well positioned to capitalize on continued recovery. Growth in infrastructure shipments was achieved despite the overhang of the then pending of expiration of MAP-21, the current federal highway build.

We believe this demonstrates a strong underlying demand for infrastructure investment and the fact that was underscored recently when the US House represented its past legislation to provide $10.8 billion to the Highway Trust Fund and extend the provisions of MAP-21 through May 31, 2015.

The Senate is expected to address highway legislation before the August recess and President is already on record in favor of the bill. We believe these are first steps toward the full reauthorization of a new multi-year federal highway bill.

Geographically, growth in aggregate’s product line shipments was led by the west group which increased 22% of the prior year quarter. Encouragingly, the southeast and mid-America groups achieved improvement of 7% and 5% respectively.

Recovery is accelerating in the east, particularly in North Carolina, Georgia and Florida all fueled by strong employment numbers. We continue to believe this growth pattern will be experienced on a more widespread basis in the eastern United States.

We were pleased to achieve aggregate’s product line pricing increases in each geographic group which led to an overall increase of 5% over prior year quarter. The growth was led by a 10% increase in the southeast group, which benefited from both improved and improving market conditions.

We recently implemented mid-year price increases in many areas across the business and are also reaffirming our annual pricing guides. Aggregate’s product line production increased 10% in response to higher demand. Greater operating leverage led to a 5% reduction in cost per ton in both the west and southeast groups.

Production cost for the Mid-America group was hampered by challenging weather conditions in the Midwest, that’s illustrated by Iowa’s third wettest June in 141 years. Midwest operations battled the elements through much of the quarter and experienced correspondingly higher repair costs.

So, direct aggregate’s product line production cost per ton decreased slightly compared with the prior quarter. Finally, consolidated cost of sales were adversely affected by over $13 million when compared with the prior year quarter due to the impact of changes in inventory levels.

In the second quarter of 2014, we reduced finished goods by 1 million tons. On a comparison, in the second quarter of 2013, we built over 2 million tons of inventories. Our vertically integrated operations consisting of asphalt concrete and road paving, each achieved sales growth over the prior year quarter.

Notably, the ready mix concrete product line improved 48% reflecting both pricing and volume growth. On a combined basis, gross profit for these businesses increased more than $5 million over the prior year quarter. Overall, the aggregate’s business leveraged 20% increase in net sales into a 170 basis point expansion of gross margin to 20.7%.

Notably, the Mid-Atlantic and Mideast divisions achieved an incremental gross margin consistent with our publicly stated expectations. The specialty products business again generated quarterly records for net sales and earnings from operations. Net sales were $61.9 million, an increase of 9%, primarily driven by growth in the chemicals product line.

The business reported a gross margin of nearly 38%, which is up slightly versus the prior year quarter. As expected, consolidated SG&A as a percentage of net sales was 6.1%, a decline of 140 basis points. The reduction reflects lower pension expenses and the absence of information systems upgrade costs that were incurred in 2013.

As previously mentioned, we’ve closed the TXI acquisition earlier this month by issuing 20.3 million shares of common stock. I want to publicly welcome our new members from TXI and look forward to their contributions to our company and shareholders.

I’d be remised though not to acknowledge and thank all of our employees for their extraordinary work in connection with this transaction as well as the integration of TXI to our southwest division managed by Larry Roberts and now headquartered in Dallas.

The collaborative teamwork that was exhibited throughout this transaction and at every level of the organization enabled us to move forward smoothly and greatly enhanced with our aggregates and ready mix concrete positions by adding operations in Texas, Louisiana, and Oklahoma.

We also acquired three cement manufacturing plants and several distribution terminals in Texas and California. Our cement business also headquartered in Dallas represents a separate operating segment for our company and is managed by newly hired division President, Bob Kidnew who joins us with more than 20 years of cement industry experience.

We are pleased that our internal day one operating targets from that and our teams are working hard on integration and synergy realization. We expect annual synergies of $70 million by 2017.

We recently issued $700 million of senior notes, consisting of $400 million of 4.25% ten-year senior notes and $300 million of three year variables rate senior notes.

The proceeds along with available cash and incremental borrowings under in the trade accounts receivable facility were used to refinance the public debt we assumed from TXI, which carried an annual interest rate of 9.25%. Based on current interest rates, we expect to save $34 million of interest expense as a result of the refinancing.

We also expect to realize additional value from TXI through the sale of non-operating real estate. TXI also provided more than $400 million of net operating loss carry-forwards as of May 31, 2013. We expect to utilize these NOLs as well as NOLs generated during fiscal 2014 over the next few years.

Overall, we expect the acquisition to be accretive to earnings per diluted share this year excluding one-time costs as well as cash flow in the first full year following integration.

Shortly before the closing of the transaction, we announced an agreement with the United States Department of Justice under which we would divest our North Troy quarry in Oklahoma and two rail yards, one in Dallas and the other in Frisco Texas. This agreement resolves all competition issues with respect to the TXI acquisition.

As of the acquisition gain our market capitalization is nearly $9 billion. Further, Standard & Poor’s Dow Jones Indices announced our inclusion in the S&P 500 Index. We view this as an endorsement of our financial stability and prospects for future growth.

We are delighted to welcome new shareholders index based investment funds add our common stock to their portfolio. In anticipation of closing the TXI transaction, we incurred $5.3 million or $0.07 per share of acquisition and integration-related costs during the second quarter. For the quarter, earnings from operations were $96.2 million.

Excluding TXI related costs, adjusted earnings from operations were $101.5 million, an improvement of more than 30% over the prior year quarter. On a year-to-date basis, we have generated $70 million of operating cash flow, 45% improvement over the prior year period. This increase is directly tied to our earnings growth.

We remain in compliance with our leverage covenants and in that regard, our consolidated debt to consolidated EBITDA ratio was 2.5 times at June 30, within our targeted leverage range. We recently modified the leverage covenant to exclude one-time acquisition and integration costs during the next 12 months.

We also increased our trade receivables by $100 million. As amended, the facility has maximum borrowings of $250 million subject to the level of receivables. Looking at the balance of the year, please note that our forward guidance excludes the impact of TXI operations.

As mentioned earlier, we fully expect the acquisition to meet the financial and strategic goals we set. We will provide you with more specific information about the impact of these new operations and their benefits to our results on our third quarter earnings call and we’ve had a full quarter of that business under our belt.

As to the guidance, we are continuing to see the positive impact from a macro perspective. Moreover, the favorable trends in our business and markets especially growth in employment in general construction activity augur well for increased revenues and profits rise.

The Dodge Momentum Index continues to forecast growth in non-residential construction and we expect further growth in both the heavy industrial and commercial sectors. Shale developments in related following public and private construction activities are anticipated to remain strong.

Furthermore, the commercial building sector should benefit from improved market fundamentals including higher occupancies and rents, strengthened property values and increased real estate lending. Based on these factors, we anticipate non-residential end-use shipments to increase in the high single-digits.

Residential construction should continue to grow in our primary markets driven by rising employment near historically low mortgage rates and pent-up demand. For the first time since 2007, total annual housing starts are anticipated to exceed 1 million units.

We believe this trend will lead to double-digit volume growth in residential end-use shipments. For the public sector, authorized highway funding from MAP-21 will increase slightly compared with 2013. Furthermore, state initiatives to finance infrastructure projects are expected to grow and continue to play a more role in public sector activity.

Based on these trends and expectations we anticipate aggregate shipments to the infrastructure end-use market to increase slightly. Finally, our Chemrock and Rail end-use market is expected to have mid to high single-digit growth compared with the prior year.

As previously mentioned, we increased our volume guidance and now expect aggregate’s product line shipments to increase 6% to 8% compared to 2013. Our outlook assumes that Congress approves measures to provide federal highway funding beyond the expiration of MAP-21 in September and an additional revenue source for the Highway Trust Fund.

We also expect aggregate’s product line pricing to increase 3% to 5% over 2013. Aggregate’s product line direct production cost per ton is expected to decrease slightly compared with 2013. Our vertically integrated businesses should generate between $385 million and $405 million of net sales and $40 million to $45 million of gross profit.

Net sales from the specialty product segment should range from $225 million to $235 million generating $85 million to $90 million of gross profit. Steel utilization and natural gas remains two key drivers for this business.

SG&A expenses as a percentage of net sales are expected to decline compared with 2013, driven in part by nearly $8 million of non-recurring costs incurred in 2013 primarily related to the information systems upgrade, as well as lower pension costs in 2014. Interest expense should remain consistent with 2013.

Our estimated effective income tax rate is 29% excluding discrete events and capital expenditures are forecast to be $155 million. To conclude, we are excited about our business and how it’s positioned. Important key drivers for us are getting better.

We expect to see further stability in the public sector which combined with continuing growth in private construction provides a great opportunity for us to continue our margin and profitability improvement. In addition, the timely acquisition of TXI enhances our ability to leverage and grow the dynamic western markets.

As we look ahead, we remain focused on completing the integration of the acquired operation, capturing synergies and creating additional shareholder value. Thanks very much for your interest in Martin Marietta. If the operator will now give the required instructions, we will turn our attention to your questions..

Hi, thanks for taking my questions today. And first focusing on the public end-markets, are you seeing any DOT slowing down in light of the uncertainty and do you see – we have not seen that based on our industry work with DOTs.

But first, we’d like to see, what you are seeing on your add and then also if you could clarify what states are accepting more responsibility for funding versus relying fully on Federal? Thank you..

Kathryn, interesting question, short answer is we are not seeing state slowdown, we are hearing states talk about slowing down. So, our take is – the talk is more prevalent right now than the action is. This issue may recall states like Colorado earlier in the year came out and definitively said that they would move more slowly on public works.

We haven’t necessarily seen that but in some instances, where we have seen edges of that. What’s happened is private work has been so robust. It’s pushing up public working to 2015 is actually something that we would welcome.

So, that’s the primary take that we are seeing, but as we look at the states in which we are most active Texas, Colorado, Iowa, North Carolina, Florida, we don’t see it.

Obviously, public works in Georgia has been under some degree – over the last several years period and if you look at what’s going on there, Kathryn, the city of projects in Georgia right now in the northwest parkway is this large, is the Georgia DOT budgeted.

So coming back and answering the other part of your question, states like Georgia, North Carolina, soon is what we believe is kind of the I77 hot lane, Florida with I4, Colorado on Highway 36. Obviously, a lot of Texas C3 work right now. Those are the states that we are principally seeing that type of public private partnerships.

We see a lot of those projects going now and believe that they will turn actually into same year projects in the foremost time. But that’s what we are seeing and I hope that’s responsive to your question..

Sure, it is. Moving over to price, last quarter, discussed having a mix impact of pricing. This quarter, put up 5% pricing which was ahead of expectations.

Can you discuss the dynamic of mix and to pricing in Q2 and how we should think about that over the next nine to 12 months?.

So, when we look at Q1, several things we really have, you saw a geographic shift to the west and you are seeing more base activity particularly in markets like Houston. That was the primary shift that we are seeing. I think you saw that shift aside from the volume, I mean, obviously you had much more volume in the last – at 22% top in the west.

I mean, that’s a notable number. So I think you had to take that into account. But from a pure mix perspective on product mix, we didn’t see that much of a shift or something that I would say is notable with one exception and that’s in Colorado, because we are selling a lot of fill materials in that market as they come nearly 9%.

So Kathryn what we are seeing across the front is good solid steady price increases and of course I mentioned in our commentary as well that we saw a good number of mid-year price increase..

And what’s the driver for the greater rate of increase in base stone versus clean stone pricing?.

I think several things, I think you are just seeing more new work and I think you are seeing more new work in two different dimensions. So I think you are seeing more new work in some divisions. You are seeing more new work in commercial construction and you are seeing more new work in these T-type projects going forward.

So I think simply that’s product that’s more in demand and demand tends to drive product type. So think that’s primarily what we are seeing Kathryn..

And final question, what are the markets where you are pushing through amid your price increase?.

And what – as we look at mid-years, this year I am happy to report that we are seeing mid-year price increases in all divisions including specialty products. We actually saw wider slots as mid-year price increases this year and sure a number of them we saw last year.

The blend goes anywhere from a low of up $0.30 a ton up to – in some instances to $2 a ton in aggregate, we’ve seen changes of $5 to $10 for cubic yard and ready mix. And of course, I mentioned in our commentary that we will talk more about TXI – our build per quarter.

One thing we had to add under our belt is the ability to go and put in a cement price increase in both Texas and California and we will look for $10 a ton in both of those markets effective October 1..

Right, thank you..

Thank you, Kath..

Thank you. Our next question comes from the line of Arnie Ursaner from CJS Securities. Your question please..

It’s actually Lee Jagoda for Arnie. Good afternoon..

Hi, Lee..

Ward, can you expand a little bit on the $13 million negative impact of profitability from selling product out of the – where there any segments in particular or any product line have been impacting more than others?.

And I mean the, the quick answer is, during the quarter, we reduced aggregate’s finished goods by million times and what you do when you do that is you effectively release the related capitalized costs into earnings. So as operations principally in our west and southeast groups use the inventory stockpiles to meet demand.

The action we saw happened that was pulled down. Now as a reminder, during the second quarter of last year, we build over 2 million tons of inventories and again that was primarily the west group.

So when you have that type of swing in inventories, what we saw at the end of the day was consolidated cost of sales were adversely affected by a little bit north of $13 million. That was the swing..

Okay, and then just as a follow-up, could you modify the impact of the higher maintenance and repair costs in the quarter and maybe discuss some of the factors that led to the increased expense?.

Sure, and here is the way I would think about that, Lee. If we look at maintenance and repair and the part of our company that has seen volumes going well for a while and let’s focus on the west group, because that’s where our volume recovery has been more constant. Our MNR numbers in the west group are actually favorable.

Now what’s happening is we are seeing our – it’s not horribly robust but we are seeing volume go up in both the southeast and in mid-America. So again, mid-America, 5.1, southeast up 7.3. What happens when you see that for the first time in a while is basically you are re-commissioning rolling style.

And you are going to have certain costs as you re-commission it and then push it forward for some period of time and hopefully you won’t see that cost recur. So as we come back and look at that, clearly, we saw a rise in that in portions of the southeast and in portions of mid-America as volume then grew.

It tended to be focused really on rolling stock, so primarily loaders, and I think that’s the primary issue.

The other thing that I did mentioned in my commentary, I think it probably did us to the tune of a couple of million bucks was purely what was happening with some of the costs that were inherent and the weather that we were seeing in the mid-western United States.

A lot of wind, some conveyor damage that came from that literally soft ball sized in part of that, and as I mentioned, one of the wettest Junes and in nearly 150 years. So, that does have an effect particularly when you are entering Q2 as we were..

Okay, thanks very much..

Thank you, Lee..

Thank you. Our next question comes from the line of Jack F. Kasprzak from BB&T. Your question please..

So, good afternoon, Ward..

Hi Jack. .

Congrats on a good quarter. Relative to residential commentary which is strong for you guys in the quarter. However, housing starts lately have flattened out in particular in the east, basically flat in the second quarter.

Should that not give us a little cause for concern with regard to housing activity in general and what we might do for your volumes in the back half of the year not in the south is a key market for you guys.

Or are you guys seeing something different that might give you more optimism than what’s represented in the macro numbers right now?.

Right, I think, Jack we have said it.

I think we are in a time and you’ve heard us say it over the last, really a year that where you are today matters more than it has than any other time in our industry and such that you pause and look at housing in our markets right now, some of the numbers that I have seen, these are percentage changes over the last 12 months.

North Georgia, clearly a market that has suffered disproportionately up 27%.

San Antonio, a market that’s seen a lot of growth over the last several years still up 27%, Virginia up 26%, Florida, up 23%, parts of North Carolina, up 21%, Greensborough, the Triad has really had a tough time in this downturn, those numbers were up 12% and even if I go to a market like Houston that we would have told you a year ago it was not an recovery.

But was an expansion even during that period of time that’s been an expansion. We are seeing numbers there up 11% right now. And I think part of what’s happening is you are seeing two things to in residential right now. You continue to see good multi-family. So we are writing around here in Raleigh anecdotally what’s going on.

I am going to see a lot more multi-family in this market and I am going to see single-family in this market. But what that tells me is the single-family is likely coming behind that, Jack. So, I think as we look at our individual markets, I am not particularly alarmed by the more macro trends. So I think it’s about where you are..

Okay, great.

And second question is, within your non-res segment, how much of your volume is related to oil and gas activity, shale activity?.

And what if you want to go back and take a look, obviously, non-res for us last year was around 30% and if we look at what non-res was for the quarter, again, it’s lining up in a pretty healthy place. It was about 31% for the quarter.

If we look at shale for all of last year, Jack, shale for last year was around 6.7 million tons and as we look at where we are this year, we see shale being healthier in 2014 than it was in 2013. For example, we are expecting annual growth in the Niobrara by itself of 10% to 15% and we continue to see good strength in Eagle ford.

And surprising strength right now in Haynesville and I guess the one that continues to surprise me, we saw over 1 million tons last year simply going to the Marcellus. So that gives you a rack up of what’s going on in those shale plays is how that fits into the overall non-res..

Okay, great. That does it for me. Thanks..

Thank you, Jack..

Thank you. Our next question comes from the line of Jerry Revich from Goldman Sachs. Your question please..

Hi, good afternoon..

Hi, Jerry..

Can you please talk about out of the P3 projects that you alluded to, what proportion of your infrastructure business would you estimate that’s today and presumably your visibility is reasonably good on those projects going forward.

I am wondering if you have a rough sense of how significant part of your infrastructure volumes that could be a year from now based on the projects?.

Well, Jerry, I think that can be a more considerable portion next year. If we look at what’s out there right now and markets that matter to us. In Georgia’s northwest corridor, in Texas, Grand Parkway has took your money, in California they are going to be a few that’s going forward, I think we should have some impact on.

But if we look at what the likely next round of approvals is going to be, that’s much more meaningful to us. So in Texas, interstate 35 is in queue and North Carolina I-77 is. In Ohio, it’s 5 – in Florida we know I4 ultimate is going forward, but it’s going to get $50. So those are the ones that we think will stay in the next round of approvals.

Even beyond that if we pause and take a look at what I think is in the queue but we are uncertain on the level of timing, there are couple of projects in Florida, really in the Tampa corridor. If you combine those two, you’ve still got the mid- Mid-Currituck Bridge in North Carolina. That's a $611 million project.

And then by my last count, there were at least five other projects, state highway 288, 183, and Padre Island, and route 4 – I am sorry, those four in Texas and then two more in Virginia. So as we tally up what the work is that we think is, A, likely next round.

We think those are pretty big and impactful projects to us and then when we look at the ones that have a more uncertain future timing. We think those two can be impact to us given the fact that much of it disproportionate number of it is either in Florida where we are the infrastructure people in Texas where we are a market leader..

Any chance you have the total project value out of the ones that you think are likely to move forward in those markets?.

You know what, okay. If we look at I35 east and Texas at $1.4 billion, I77 in North Carolina, the 50 is funding is over $0.5 billion the bridge and I mean the bypass in Ohio was $819 million and I4, again the TIFIA funding, $2.7 billion..

Thank you for sharing that and I am wondering, on the TXI cement business, you were kind enough to talk about the price increase announcements you've laid out.

I'm wondering if you could update us on what the realized cement pricing was for the business in July or in calendar 2Q, if you're willing to share that?.

Here is the way that we are going to approach that Jerry and part of what I think I need to explain is like a process works when you are in a DOJ governed transaction like this, because part of what we recognize is until we had DOJ approval to close this deal, we couldn’t be certain that they was going to go.

We felt confident that would but you can’t ever bid on. So what we never said, take our local management and put them in that business. We had people here at our headquarters looking at that. But Larry Robert, I mentioned Bob Kidnew in particular who is riding our Cement business has literally had 30 days of hands on time in that business.

So what we are focused on right now is recognizing that the TXI Martin Marietta business that’s combined together going forward is a very different business and the TXI was the ruling here. And the management team that was there and responsible for that business is in large part not a part of the business going forward.

So what we are going to do is really get this under our belt, come back and talk you about it the next earnings call. But what I’ll tell you is this, we have found nothing in our integration activities. We have done nothing in anything that we’ve done that has in any way diminished.

How good we feel about this transaction and we feel very, very confident and comfortable that the numbers and strategies that we’ve laid out are very achievable..

And then if I could ask on the inventory de-stock, is there any additional room to go? Or was this the biggest chunk we saw this quarter? We'll talk about that a little bit more in the third quarter?.

We will talk about that a little bit more in the third quarter. I mean, part of what we said for a while is particularly on base products, again, I don't think this is Martin Marietta issue, I think it's an industry issue.

As the industry was going through the downturn and we were having to play more for clean washed stone, because that's what a lot of the stimulus work was and otherwise. People were genuinely building base. And then part of the earlier questions we had is, why are we seeing base pricing going up.

Part of what we are seeing is more base activity out there. So again, it is not something that I lament. I think being able to go and rebalance the inventories is actually a very responsible and appropriate thing for us to do. And in some respects, Jerry, I hope we are faced with that problem. And I put problem in quotation marks..

Jerry, it’s Anne and I would say that, possibly you could see some in Q3. Now if volumes continue to be as strong as they were in the second quarter, we could likely begin to see some inventory build as we hit the last part of the year to get ready for a strong construction season in 2015.

But again, we will see that as we move through the balance of the quarter and complete our planning for 2015..

Okay, and then lastly, if I could, on the capital deployment side, now that the TXI deal has closed, can you calibrate us on how you're thinking about capital deployment going forward in terms of buyback versus acquisitions? How does each path look to you? And I appreciate it might be a couple of quarters before you are willing to put capital to work after closing that transaction.

But I would appreciate you giving us an update on your framework. Thank you..

Okay. Thank you, Jerry. That’s a great question. I think one of the beauties of this transaction is it droves off tremendous amounts of cash and that as we’ve said, we thought we would be cash flow accretive within the year after the transaction was complete. So that will give us the opportunity to continue to look at capital deployment strategies.

As always, we look at the strategy that the opportunities present themselves. But, it’s always looking at acquisitions to see in those places where we can continue to execute against our strategic plan to gain leading market positions across the US. Obviously, we have some organic capital needs.

We’ve estimated about $50 million this year for TXI on top of the capital deployment that will do here and then we do have an outstanding authorization for share buyback. Then we firmly believe that a share buyback plan is an important part of the capital allocation strategy as we continue to get – build out the cash transaction.

We have committed to maintain an investment grade balance sheet and I think that’s important to our public debt holders and these things will have plenty of opportunity there. .

And Jerry as a reminder, we do have an authorization as Anne said to repurchase up to 5 million shares. So, just as a reminder that is there..

Okay. Thank you..

Thank you, Jerry. .

Thank you. Our next question comes from the line of Chris Olin from Cleveland Research Company. Your question please..

Hey, good afternoon..

Hi, Chris..

Just wanted to ask on transportation. There has been some talk that either cement or aggregate volumes had been running a little bit softer because people couldn't get the rail or trucking necessary.

I am wondering if that impacted you all during the quarter and will it have any type of impact in the next quarter or so?.

The short answer, I think it is impacting some of the industry or much of the industry now, particularly with respect to trucking. And I think as you get into areas where there is a great deal of shale activity.

So if you are looking at parts of Niobrara, or you are looking at parts of South Texas where there is some lot of trucking that’s been utilized in those shale plays and by the way pretty well paid trucking activities, it’s hard at times to get the truck. So, I think, when you factor that out realistically, it is a challenge in some markets.

It’s not a challenge in all of them. But if we look at trucking today versus where trucking was a year ago, it is a more difficult component today. The rail business is spotty. I mean, there are going to be some places that you are going to see services to actually going to go very well.

There are going to be others and service is going to be more challenged. I wish I could tell you there was a – that did to the way that that works, I don’t know that there is, in fact I am relatively confident that there is not. So, Chris, if I am sitting for you are, I would factor a little bit of trucking difficulties into these markets.

Some of them, but I think not just for this year, that’s probably a multi-year issue that the industry has to be sensitive to in playing around..

What we do see, Chris, thought is, historically as activity picks up and demand picks up, rail shortage, rail movement shortage is not uncommon.

I’ve kind of take it as a good sign that economic recovery is expanding beyond just the construction materials business, while that real shortage can create challenges and also creates opportunities, because we’ve got a nice rail network that we can leverage and it also gives you the opportunity to realize the value of the products that you are moving..

Okay, that's all I had. Thank you..

Thank you, Chris..

Thank you. Our next question comes from the line of Trey Grooms from Stephens. Your question please.

Good afternoon, Anne and Ward..

Hi, Trey..

Hi..

Can you – I appreciate some of the color you’ve given us on the mid-year or I guess the fall price increase for cement, $10 a ton for California and then also Texas.

But how do we think about the rollout there, and how it impacts the overall cement pricing, as far as timing?.

I think, it’s price matter. I think the timing is going to be relatively immediate. I mean, that there is going to be some protection that is going to be in various markets, but at the same time, I think one of the reasons that we are talking thus far in advances to let people know this is coming.

And part of what we have been very focused on is making sure that we are running that new TXI business absolutely sufficiently as we can and I think what this is indicative of is, we see a very good market in both Texas and California not measured by a period of months, and I think in particular measured by a period of years and I think we have an opportunity to make sure we are capturing value in that product..

And Trey, we had indicated in earlier comment, as we rolled out all the public – required public disclosures of the TXI transaction that, about a third of TXI’s existing volume was covered under some form of longer term agreements. Those should be substantially gone by the end of this calendar year..

Okay, great. That's real helpful.

Okay, yep. .

And then one last question, looking at, and I know it’s early in the process, but I think there TXI's – excuse me, Midlothian plant had the opportunity or the permitting, however you want to talk about it, to expand by about 800,000 tons.

And given the tightness that's in the market now, I mean, at what point does it make sense to start thinking about that expansion, and then on that as well, how long would the process be, if you decided to green light it hypothetically tomorrow, how quickly could that capacity come on?.

Trey, exactly it’s something that we would talk to more with you about going forward and I think the primary thing that we are focused on is making sure that we are making money. I mean, that’s what that game is about, that’s what we are going to do and that’s what the focus is going to me and Bob Kidnew and his team understand that very well..

That's fair enough. And then, on concrete, very strong pricing and volume.

Can you talk about the markets you're seeing there? Which geographic markets you're really seeing the strength there, both from a volume and pricing standpoint?.

I mean, most of the volume and price strength that we are seeing right now is really more driven and what we are seeing in our Colorado operations and I think if we are looking at what’s going on there, pricing has moved very, very nicely. Volume equally has moved well in that market.

Again, the housing market is performing, the non-residential market is performing. Keep in mind, that’s going to be disproportionately driven in some instances, particularly in Rocky Mounts by private work anyway. So that is it need to be solid for us.

We continue to feel like that’s going to be very good and we believe that, if we are looking what’s going on in the Dallas Fort Worth area, is particular right now, I mean there is just an immense amount of infrastructure work that’s going on in DFW.

If you look at what’s going in with respect to single-family homes that got the lowest foreclosure rates in Dallas today that they had in 10 years. Sales were up 7% in June with over 9000 sold. That was really an all time high. So as we are seeing that type of massive infrastructure work that’s underway in that market.

When we are seeing more and more commercial work, I mean to give you a sense of it right now, there is about 4.3 million square feet of construction underway just in Dallas. So we are seeing that in non-res.

We are seeing that in res and then we are coming back and seeing, I 35 east, 635 state highway 184, lot of Dallas Area Rapid Transit or the DART work in that market as well. I think that bodes awfully well for what the ready mix business can look like in DSW and that’s the other big market that we have post TXI..

That's very encouraging. Thanks a lot, guys and congrats on a good quarter..

Trey, thank you very much..

Thank you. Our next question comes from the line of Garik Shmois from Longbow Research. Your question please.

To follow up on the maintenance and rolling stock expenses you had in the quarter, just how we should think about that, moving forward, as demand improves.

Should these be gradual expenses that we layer in, presumably as the cycle rebounds or will they be more as step function increases to get your rolling stock and capacity where it needs to be?.

Garik , as we go back in time and look at cycles, the latter is what’s almost always been. It’s almost been a step-function increase and then you go ahead and address the issues and then it evens out and you move forward. And I think, and so we saw it during the quarter..

Okay, thanks. And just shifting to pricing for a second.

Just in the southeast group, if we can dig in there, double-digit price increases, how much of that was mix versus – this will be a like-for-like price increase?.

Well, you know what, that’s an easy one to say because mix was actually not our friend. In the southeast this quarter, we are going better that notion that you see a lot of new construction there. So actually everything that you see in that number is the real McCoy..

Okay, well, okay. So, I guess, just lastly, just two questions on TXI.

Can you just update us with respect to where you are in the divestment process of the North Troy quarry and the rail yards?.

No absolutely – thanks for the question on that. As you know, that the assets that would divest as part of the transaction are actually heritage Martin Marietta assets which means from a timing perspective we recognize going in and that was likely to be the result.

So, we were in a position to go ahead and start looking at options with respect to those sites earlier as opposed to layer, because they weren’t TXI sites. They were our own. So we can have the conversation. Our aim is this Garik, we are mature in that process.

We believe it’s moving in a very constructive fashion right now and if we are still talking about a process at the next quarterly call, I’ll be disappointed. I think, we will have that done before you and I have a conversation like this again..

Okay that makes sense.

Is it fair to assume that you're going to keep the North Troy results within the third quarter operations within the legacy business? Or is that going to be stripped out as a one-time?.

I mean, what we are doing is, we do have a whole separate quarter. So we are looking at North Troy separately from the rest of our business, but if you go back to what I’ve said about our teams and the fact that we had to operate in a very bifurcated fashion going through the diligence, we are having to do the same thing with North Troy right now.

So, you understand it Garik..

But they are in our legacy operations, Garik. .

Okay, yes, that's what I was getting at. And then just lastly, you previously identified $70 million of operational synergies with the TXI deal. Now that it's closed, wondering, you only have a month in there.

But I was wondering if you can provide any guidance if you could, at this point on any revenue synergy opportunities that you may have identified?.

You know what, obviously, we are looking at trying to finish up really a lot of just a pure integration right now, Garik. I’ll tell you, there is not a component of this business. That has been a surprise to us. There is nothing that has been a negative headwind.

Obviously, I think we can come back and talk about what we think next year is going to look like, what pricing is going to look like and a host of markets including the FW at some point later in the year and I think that’s probably the best thing for us to do right now..

Okay. Thanks so much..

Thank you, Garik..

Thank you. Our next question comes from the line of Ted Grace from Susquehanna. Your question please.

Good afternoon..

Hello, Ted..

Anne and Ward, I was hoping to dig into the inventory dynamics a little more. I know you said you'll talk more about it in the third quarter. But just, as it relates to calibrating our models and expectations, could you just walk through at least as it pertains to 3Q and maybe 4Q.

How you would expect to either draw from inventories or build? I think you made the comment that you may draw in the third quarter and build in the 4Q.

As a starting point, did I hear that correctly?.

Yes, you did, Ted, but, I am not going to walk through those dynamics, because that would in some ways – having us give quarterly volume guidance which we don’t to.

I was just giving you a macro direction as to what I would infer that could potentially happen just based on the seasonality of the business and expectations for thinking about demand in 2015. .

Absolutely understood and appreciated. And I guess the challenge we have is a year ago you over-produced, but didn't call it out. So now a year later when you have the reversal, it’s just hard to figure out how we should normalize for this dynamic.

So guess, may be ask a little differently, could you just walk through where your inventories are now on the tons basis and where you exited 2Q, compared to 1Q and a year ago?.

Go ahead. .

If you look at inventory today for the aggregates business, we are about 54 million tons as of June 30 and last year we are about 65.4 million tons. .

Okay and 1Q, if you don't mind..

I apologize, Ted, I don’t have 1Q in front of me. I usually look at in a quarter based on what’s going on from the 12/31 perspective. .

Sure..

That I’ll be happy to, we can answer that for you offline. .

Okay. And then just maybe again and this will be the last thing I will ask and we can go through it offline.

But, in terms of how to think about what you target either as a percent of LPM or forward 12 months or annualized quarterly volumes, what do you target in terms of running the business? And where are we relative to kind of the peak and trough in absolutely inventories?.

The aim is four to six turns per year, Ted, I mean, that’s where we would like to be. It’s clearly that’s the more normalized process that you should expect from us. .

Okay.

And we're right now, like two turns?.

In some areas, you are getting into that four range, but you are in that probably two to three turns, yes. .

Okay.

And then the other thing I wanted to ask about, I know you mentioned aggregate pricing increases ranging from $0.30 to $2.00 a ton and do you have an average that you put through at the mid-year?.

You know what, every market is different, Ted, and it may move within a 50 mile radius. So that we did not, we deal as we are honest with each market, very much on an individual basis. .

But you don't have a bottoms-up consolidated average?.

No, we don’t, not right now. Not that we want to talk about. .

Okay.

And just – I think you said it was up in, was it most markets or all markets?.

I mean, what I said was up in all divisions and it was up in more areas this year than it was last year and when I said all divisions, I also meant specialty products. .

Okay could you – and the last thing I'll ask, could quantify when you say more areas this year than last, what those numbers are?.

Last year, we said it was – from a division it’s all up, last year we said it was going to be about half of our districts and this year it’s comfortably more than half of our districts. .

Okay, great. I'll get back in line. Thanks guys. Good luck this quarter..

Thanks, Ted. .

Thank you. Our next question comes from the line of Stanley Elliott from Stifel. Your question please..

Thank you for fitting me in here.

Real quick, so when we think about the NOLs, a few years, is there a way to get a little bit better handle on how the pacing of the NOLs will be on a go-forward basis?.

I’ll let Anne, talk NOLs. .

Yes, Stanley, we have indicated that we thought we would realize those NOLs over about a two to three year period. And from a pacing perspective, it’s going to depend on the earnings dynamic. Of course, we’ve not provided any – well.

And I can tell you, if you think about TXI’s legal entities for those fiscal year, the short period and for the calendar year, you are probably going to actually increase the NOLs this year. You think about the one-time costs related to the transaction et cetera that I’ll get – have deductibility.

So, I think the pacing of those really begins to pick up in 2015 and probably realizes over a three year period. .

Okay, and then, I apologize if I missed it, you talked about the North Troy assets, but what about some of the other assets that TXI had that were up for potential divestiture, kind of the non-core? Have you started making any progress with those and any color there would be helpful?.

What we had said, we felt there was probably about $100 million worth of excess property there. We continue to feel very comfortable around that number. It is something that we are focused on. I don’t want to give you a precise timing on when that will go because real estate are real estate deals.

But again, we feel like comfortable within a couple of years we would have dealt with that. .

Perfect. Well, thanks very much and best of luck..

All right, thanks so much..

Thank you. This does conclude the question-and-answer session of today’s program. I’d like to hand the program back to Mr. Nye for any further remarks..

Thanks again for joining our second quarter earnings call and for your interest in our company. And as you know, we are committed to a very disciplined approach and our aim is to grow long-term shareholder value and we look forward to talking more about our heritage business and our new business with you when we meet next in October.

Until then, take care, and thank you for your interest..

Thank you ladies and gentlemen for your participation in today’s conference. This does conclude the program. You may now disconnect. Good day..