Ward Nye - Chairman and CEO Anne Lloyd - Executive Vice President and CFO.

Kathryn Thompson - Thompson Research Group Tray Groom - Stephens Inc Garik Shmois - Longbow Research Jerry Revich - Goldman & Sachs Keith Hughes - SunTrust Tom Diffely - DA Davidson Ted Grace - Susquehanna Brent Thielman - D A Davidson & Company Craig Bibb - CJS Securities.

Good day, ladies and gentlemen. And welcome to the Martin Marietta Q4 2014 and Full Year Financial Results Conference Call. At this time, all participants are in a listen-only mode. Later, we’ll conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, today’s call is being recorded.

I would now like to introduce your host for today’s conference, Mr. Ward Nye, Chairman and CEO. Sir, you may begin..

Good afternoon. And thank you for joining Martin Marietta's quarterly earnings call. With me today is Anne Lloyd, our Executive Vice President and Chief Financial Officer.

As announced in this morning's release, we were pleased to complete the transformation year in 2014 from Martin Marietta culminating with the 77% increase in fourth quarter net earnings over the prior year quarter.

Our results reflect growth in the Heritage aggregates business, the expanding contribution from the acquired TXI operations and the consistently strong performance by our Magnesia Specialties business. Additionally, we also announced a 20 million share repurchase program on which I'll further elaborate later in the teleconference.

In addition to earnings growth, we were pleased to announce positive developments related to the TXI synergies. First, we exceeded our previously announced guidance for 2014 by 53% or nearly $10 million.

Second, based on our integration progress to date, we now expect to achieve annual synergies of $100 million by 2016 more than 40% over our previous guidance. This rate of synergy realization made the TXI acquisition modestly accretive to 2014 earnings excluding of course to one-time costs related to the transaction.

This accretion should continue into 2015 and beyond based on incremental synergy realization coupled with continued growth in the underlying business. These developments confirmed our ability to deliver on our objectives and create additional shareholder value.

Before further discussing the quarterly and full year results, as a reminder, today's teleconference may include forward-looking statements as defined by securities laws in connections with future events or future operating or financial performance.

Like other businesses, we are subject to risks and uncertainties which 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 our fourth quarter and full year 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. To continue to provide transparency into our fourth quarter results, we will again discuss the results for the heritage business separately from those of acquired operations.

To facilitate this discussion, we have made available during this webcast and on our website supplemental financial information that is consistent with how management analyzes the business.

First, as detailed on Slide 2, the Heritage Martin Marietta business which includes Magnesia Specialties provides the same-on-same comparison to the prior fourth year quarter. Next, the results of the acquired operations by product line and in total are provided on Slide 4.

And finally on Slide 7, we provide an analysis of the increase in earnings from operations. We believe this approach provides meaningful information to better understand the drivers of our performance. Now let's review some of the underlying trends for the Heritage business.

Slide 3 provides volume and pricing metrics by product line for the Heritage aggregates business. We are pleased to report volume growth in all product lines and in all reportable groups within the aggregates product line. Additionally, pricing strength was notable in both aggregates and ready mix concrete product lines.

Consistent with trends seeing through our 2014, fourth quarter aggregates business growth was led by robust activity in our West Group primarily in Texas and Colorado.

Texas continues to benefit from a strong state department of transportation with the cumulative budget of $20 billion over fiscal years 2013 to 2015; Texas has created a sizable project backlog. This public work is naturally separate and distinct from a very healthy private sector in Texas.

Thus all the aggregates product line shipping increase in the West Group was approximately 8.5%. The same-on-same comparison reflects growth of more than 15%. This comparison excludes shipments in the prior year quarter from the North Troy Quarry in Oklahoma and two rail yards in the Dallas area, which were divested in the third quarter of 2014.

This transaction was actually the only required divestiture for the approval of the TXI acquisition by the United States Department of Justice in connection with its Hart-Scott-Rodino review. North Carolina, Georgia and Florida all rank in the top five states for employment growth. A catalyst for construction activity.

Consistent with this trend, recovery in the construction market is underway in the Eastern half of the country although currently lagging the west. Heritage aggregates product line volumes in the mid-America group which increase to 7.7% reflects growth throughout North Carolina.

The South East Group benefited from activity --increased activity in Florida with the TIFIA funded I-4 project is beginning and the housing market is also improving. Heritage aggregates product line shipments reflect growth in all end-use markets.

The infrastructure market represented 44% of quarterly volumes and the shipments to this sector increased 12%. This growth reflects double-digit improvement in each reportable group and notably was achieved while the Federal Transportation funding is being provided under a continuing resolution through May 31.

During this time, we've seen increase in momentum for a multiyear federal highway bill. The executive and congressional branches of government each recognized the need to invest in the country's aging and deficient infrastructure. Despite bipartisan support for new bill, the main area of debate continues to be the funding source.

The nonresidential end use market represented 32% quarterly Heritage volumes and shipments increased 4% over the prior year quarter. Growth was achieved in the commercial and energy sectors.

While declining oil prices caused concern about the sustainability of energy related projects, we don't expect the significant impact on our business based on both the backlog and the momentum of committed projects as well as $100 billion of anticipated projects along the Gulf Coast, a significant portion of which are in Texas.

Additionally, late last year Texas voters approved proposition one which authorizes annual disbursements from the state's existing oil and gas production tax collections to the state highway fund. An estimated $1.7 billion will be transferred this fiscal year alone.

The residential end use market represented 15% of quarterly Heritage aggregates product line volumes and shipments increased 5% over the prior year quarter. We continue to experience significant residential construction growth in our western markets.

By way of example, for the 12 months ending December 31, 2014, residential starts rose 33% in San Antonio, 10% in Houston, and 37% in Austin. This reaffirms our view of the value of the company's strategic growth initiatives made over the last several years which should continue to benefit our future demand.

Finally to conclude the discussion of end use markets, ChemRock/Rail represented the remaining 9% of our Heritage aggregates product line volume and shipments increasing 5% versus the prior year quarter. This growth reflects an increase in ballast shipments partially offset by a slowdown in agricultural land shipments.

Heritage aggregates product line pricing remains strong and we're pleased to achieve increases in each geographic group. Pricing increased 6% over the prior year quarter led by 9% increase in the West Group. For the full year, Heritage aggregates product line pricing increased 4% in line with our guidance.

Aggregates product line cost per ton shift declined to 2% compared with the prior year quarter. The reduction reflects increased operating leverage and an 11% decline in energy costs driven by lower oil prices. The Heritage aggregates related downstream product lines increased their total gross profit $5 million.

The ready mix concrete product line experienced pricing and volume increases of 11% and 2% respectively, which led to an 840 basis points in the product line gross margin. Additionally, the asphalt business reported 16% increase in its net sales.

Gross profit for the Heritage aggregates business increased $27 million and was 21.7% of net sales, an improvement of 370 basis points over the prior year quarter. Notably the Heritage ready mix concrete business gross margin expanded 570 points.

These are primarily the operations acquired in the Denver market at the end of 2011 which have demonstrated steady improvements since the acquisition. We expect the similar trend in the acquired TXI ready mix business.

Our specialty products business posted record fourth quarter net sales of $58.2 million and a gross margin of 39% contributing earnings from operations of $19.8 million. Slide 4 through 6 provides financial information and key metrics for our acquired operations.

For the fourth quarter, the acquired aggregates product line reported net sales of nearly $31 million on shipments of 2.5 million tons. Average selling price was $12.13 per ton helped by increased rail distribution yard and sand and gravel shipments.

Performance in the Aggregates business did improve at an accelerated pace given the strength of underlying market demand and synergy realization. The acquired ready mix concrete business shift 1.3 million cubic yards during the quarter at an average selling price of $82.74.

In the South West, fourth quarter selling prices and production costs are typically lower than in the warmer months when temperature control measures are required during the production process. Such measures are passed on as additive pricing when incurred. A $6 per yard price increase was announced in the North Texas market on August 1st.

For realization of the increase will likely take six months as we work through the current backlog. As a reminder, the cement business includes a leading position in the Texas markets and the state-of-the-art rail located cement plant in Southern California.

The Texas plants continue to operate in markets where demand currently exceeds local available supply. A trend expected to continue for the near future. In the fourth quarter, we shift 1 million tons of cement. Cement pricing of $93.02 per ton is $7.07 or 8.2% higher than the third quarter.

For the fourth quarter, the cement business generated $100 million of net sales and $28 million in gross profit. The Texas plants are operating between 75% and 85% utilization and the California plant is operating below 70% utilization reflective of a slower Southern California construction economy recovery.

We continue to anticipate California markets should reach the supply demand equilibrium during 2016. Our cement group leadership is implementing strategic plans regarding interplant efficiencies, plant utilization at efficiency thereby creating a roadmap for significantly improved future profitability.

Our remaining key area of emphasis is to increase and accelerate the synergistic value of the TXI acquisition. We're thus pleased to announce our revised expectations of $100 million of annual synergies by 2016. For the second half of 2014, we achieved synergies of nearly $28 million, 53% above our guidance.

These results are not possible without the relentless and effective efforts of our workforce. I'm proud to thank and commend our employees for their stellar progress.

We planned to complete the systems integration for the cement and ready mix concrete businesses no later than June of this year, accordingly and as planned certain duplicative corporate overhead costs will continue through that time. As previously announced, we acquired over $500 million of TXI's net operating loss of NOL carry forwards.

We used $48 million of these benefits to reduce our cash taxes to 17% of our income tax expense. We expect to utilize the remaining NOLs over the next two to three years. For the fourth quarter, consolidated SG&A was 6.4% of net sales, a 120 basis point reduction compared with the prior year quarter.

This improvement reflects both lower pension expense as well as net sales growth which outpaced the increase in SG&A. We incurred net acquisition related expense to $1.7 million which reflects our estimated quarterly run rate related TXI going forward. As detailed on Slide 7, our consolidated earnings from operations were $119 million.

This compares to $63 million in the prior quarter and represents an improvement of nearly 90%. With the full year we generated $382 million of operating cash flow compared with $309 million for 2013. Importantly though excluding payments for acquisition related expenses, adjusted operating cash flow was $452 million.

This increase is due to higher earnings before depreciation, depletion and amortization expense and less cash taxes partially offset by cash utilized for working capital.

The ratio of consolidated debt to consolidated EBITDA for the trailing 12 months ended December 31, 2014, was slightly less than 2.5x in compliance with leverage covenant and in line with our target as of yearend. Our ability cash has provided us the opportunity to increase our return to shareholders in addition to the quarterly dividend.

Consistent with this objective, this morning we announced a new share buyback program that includes authorization to repurchase up to 20 million shares of our common stock. To provide context to this number, this represents nearly 30% of our outstanding shares as well as the number of shares issued on our July 1, 2014 acquisition of TXI.

We expect to complete the program over three years. However, the actual timing would depend on available cash and the market price for our stock during the timeframe. Our balance sheet strength has allowed us to provide this return to our shareholders while also continuing to invest in our business responsibly. Moving to our 2015 guidance.

We anticipate growth in nearly all of our markets both geographically particularly areas with strong employment gains and construction end use. Further, we expect economic expansion in the Western United States to continue and the economic recovery in the East to accelerate.

Overall, in our geographies we expect growth in our three largest end use markets. The infrastructure market is expected to increase in the mid single digits.

Nonresidential construction is expected to increase in the high single digits, the residential market is expected to experience a double digit increase and the ChemRock/Rail market is expected to remain relatively flat.

Geographically, we expect aggregates product line shipments to increase 10% to 12% with a 4% to 7% growth in the heritage business and the remainder coming from a full year of owning the TXI operations. We expect aggregates product line pricing to be up 4% to 6% over 2014.

Aggregates product line cost per ton ship is expected to decline slightly compared with 2014. The aggregates related downstream operations are expected to generate between $875 million and $925 million of net sales and $65 million to $70 million of gross profit.

We expect net sales for the cement business to range from $475 million to $500 million and gross profit to be $120 million to $130 million. Magnesia Specialties net sales are expected to be between $240 million and $250 million generating a gross profit of $85 million to $90 million.

SG&A expenses as percentage of net sales are expected to be less than 6%. Despite an $18 million increase heritage pension cost over 2014. On a consolidated basis we expect to generate earnings before interest, income tax, depreciation, depletion and amortization expense or EBITDA ranging from $825 million to $875 million.

Interest should approximate $75 million to $80 million and the estimated effective income tax rate is expected to be 32% excluding discrete events. Capital expenditures are forecast to be $320 million which includes $35 million of synergy related capital and $80 million for continued development of the Medina limestone quarry outside of San Antonio.

This capital project will provide a modern highly efficient rail connected quarry capable of shipping products to South Texas including Houston for generations. To conclude, we are grateful to our shareholders for their support throughout an exciting and transformational year.

The TXI acquisition strengthened and broadens our foundation and we are well positioned to benefit from the growth demand for building materials and to continue delivering enhanced shareholder value.

Additionally, for those of who you registered we look forward to seeing you at our Investor and Analysts Day this week on Thursday, February 12 at the Plaza Hotel in New York City. With those of who you cannot attend, the event will be webcast and our website contains more details. Again thanks very much for your interest in Martin Marietta.

The operator will now give the required instructions. We will turn our attention to answering your questions. .

[Operator Instructions] Our first question comes from Kathryn Thompson with Thompson Research Group. Your line is open..

Thank you for taking my questions today.

First couple questions are focused on TXI and in particular for the quarter, what was the switch between Q3 and Q4 in terms of realizing the upside from TXI synergies? And to that and what inning are we in terms of cost take- out for TXI?.

Kathryn, thank you for question. I guess two components in that. Number one you have to remember when we went into the transaction and closed it on July 1, because of the anti-trust process, our operating teams had really only had about a couple of weeks with that business before we closed.

So from a practical matter their time on the ground and their time looking for what we signed or we turn found synergies were really pretty short. So what's happen is as you are seeing really the result of having our teams in therefore in more expanded period of time. That's what really driven the acceleration of these synergies.

So I am not that surprised by it. I knew if we could get our good people on the ground they would capture those and we would see them quickly and I do think they did a fantastic job with that. To the next part of question, where we are in the innings. I think we are in the early innings of this game.

I mean again we've owned this business for a little bit over half year, you are seeing that type of synergy realization that quickly. You have to assume that we as a combined work force and that's what we are now. We will continue to work very effectively to find more and I think you should expect us to find more. .

One other follows up question on TXI.

What were the -- could remind me the total aggregate volumes for calendar 2014 and what is TXI earnings contributing to 2015 in terms of the guidance you outlined today?.

I can give you exactly what they were for the -- we are looking at 3.5 million tons of TXI really for the quarter and that's stone side we are looking about 1.3 on the cement side for the quarter casually again. The full year, we had never gone back and talked about that but we have given good guidance on that going forward. .

Okay, perfect. In terms of the volumes related to energy, in the past you'd it was roughly 7 million tons related to the energy industry are region specifically impacted by that.

How much of the volumes two tiers one, what do you think now in terms of trends you alluded to that in your prepared commentary and then the second half is how much of this volumes are more related to directly to the energy industry so for instance building out a pad versus in the other type of construction projects which might be, for instance, building on road in a region that would be building road anyway but happens to be in the oil patch?.

Understood. Here what we saw energy in the fourth quarter, give you sense, we saw fourth quarter sale volumes about 1.7 million tons that was down about 350,000 tons for the quarter.

We saw pull back in the Eagle Ford oddly enough or maybe not oddly enough, we saw Haynesville will actually up so what you are seeing is a little bit of play on gas versus gas and oil, Kathryn.

If you go back and look at full year is around 7.5 million tons, you just been dead on that, most of that is going to either roads or pass or otherwise but here is the take that we have on it.

What are seeing is a strong enough recovery in other areas of nonres that we think that's going to offset whatever bumps there maybe in some elements of the products simply going to the different shale place. So from where we are sitting, the shale play has always been in nonres all by itself. We are just seeing other portions of it.

They are growing so rapidly. We think it is likely to offset that. But the other piece of it Kathryn now I that think it is important is the way energy has been moving particularly in the state like Texas to put some metrics to it.

We used -- I want to say 17 million gallons of diesel fuel in the South West last year, so as we are watching oil prices come down, can it affect some degree of volume going to shale fields? The answer is yes. Do I think it is going to be horribly dramatic? The answer to that is no.

Do I think the cost benefit that we will likely to see from that is much better than the downside on the volume? The answer to that is absolutely. .

And last question.

Touching on lower diesel, what was the benefit in the quarter if you can quantify that?.

Kathryn, it was round $4 million for the quarter. To give you a sense of what run rate is looking like in Q3 we burned about 11.5 million gallons of diesel fuel. In Q4 about 10.4 and that goes back to heritage numbers. Q1 we were 6.4 and Q2 we were 8.5.

So we are looking at a run rate for this combined Martin Marietta at our TXI business, we are probably in that 40 to 44 million gallons of diesel per year. That's not a bad way to think about it. .

Our next question comes from Tray Groom with Stephens Inc. Your line is open..

Hey, good afternoon, Ward Nye. I am doing well, how about yourself? Good, so just kind of follow up on that, on the last question about energy.

So if you look at your Texas business overall, what is the mix -- is the mix of Texas any different than the mix that you have for your overall company that outlined here?.

No. It is not dramatically different. And the one thing that I would say that I think we need to think about is they have got a record letting program in Texas this year tries to the simple fact is if you look at a record infrastructure letting program this year close to $10 billion.

And then doesn't include lot of the P3 work that's going on in that state.

From an infrastructure perspective it is simply getting larger and keep in mind even the energy cargo road work that started last year about $150 million worth of that work was let but Texas I'd tell you they got $1 billion issue, they are all by themselves, so my point is thus more and more of that work probably for the next two, three years at least in Texas will tend to be infrastructure driven simply because that market is so immense right now.

.

And so the comment that you made about seeing some areas of nonres, seeing them those areas grow rapidly in your expectations for those to offset any slowdown you would see in the energy related demand.

Can you talk more specifically about your -- what are you seeing, where are you seeing those that rapid improvement?.

Here is a quick way to think of it. It continues in some respect to be highly concentrated in Texas because if you are looking at nonresidential start, so these are projects that aren't completed, these are projects that are underway and starting. The change from 2013 to 2014 was nearly $17 billion.

So you just got an enormous amount of activity in that market place that's moving in that fashion. At the same time when we come back and take a look at more traditional commercial.

In other words what's going on in office? What's going on in retail, what's going in shopping centers? What we are seeing right now Tray is considerably more work in that space and we've seen over the last several years.

But you will remember we have seen a lot of heavy work in nonres over last two three years but not a lot on the lighter side of commercial, now we are starting to see that turn. But we are also starting to see that turn in other states is important to us. South Carolina, up 14%, Colorado up 17%, so again very good nonres activity across the board..

Okay, thanks for that, Ward. And then shifting gears on the share repurchase program.

Are you guys expecting to fund the majority of that or all of it or I guess how much of it with free cash flow versus -- are you thinking you may need to lever up some and bring on some debt to fund the buyback?.

I will take the first part and let Anne come back and give some color to that. But our view is we can do this using our excess free cash flow. So we can go through this, we can take care of the requirements of the business. We can take care of the requirements of the dividend.

And as we come down to that targeted range of between 2 and 2.5 and as you heard in my opening remarks, we are now below 2.5. As we get towards that 2 range, Tray, if our projections are right the free cash flow or excess free cash flow to this business is going to kick off, is pretty considerable.

And I think that's something that we had a lot of conversation about it. But Anne you want to add some color to that. .

Yes. I mean I think the free cash flow alone could fund the program. Our view however that is you can preserve your leverage as your acquisition firepower, we think today that our ton of leverage is $850 million that can do some pretty good M&A activity funding.

So we would target that kind of two times leverage is all of our excess cash flow, similar to capital priorities are there. And preserve our firepower for financial flexibility. .

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

Hi, thank you. And congratulation. First question I guess is the follow up to the free cash flow generation that you are expecting over the next several years. Could you maybe talk about the CapEx requirements that you anticipate over the next call two to three years? You identified a large project that you are putting into the budget for 2015.

Does that go into 2016 and 2017 or how should we think about CapEx I guess when we are footing that against some pretty strong free cash flow potential?.

Let's do this. Let me come back and talk about capital spending for this year, Anne will come back and talk a little bit more about CapEx in the out years.

I mean if we are looking at $320 million for this year really the way that we are looking that's probably around 184 is an aggregate we are seeing probably around $40 million in cement, as I mentioned in my comments around $35 million on synergy, around $28 million in ready mix concrete and then of course we are buying land and otherwise.

Back to your very specific question the Medina quarry project that we have outside of San Antonio, we are looking to put about $80 million into that this year. And we expect that project to be substantially complete this year. So we expect the term to switch and have that process very much underway as we go into 2016..

And the total spends on that Medina project is about $150 million. So we've already acquired the property and done initial work there. As we look at 2016 and beyond from a capital allocation perspective, we could have placed holder in our forecasting of about $350 million annually for the combined business.

If you can look back over the pattern of our capital spending, Garik, we generally are counter cyclical. When the markets are rising, recovery is rising, we generally are investing in Martin Marietta, expanding capacity, upgrading facilities. And then generally we do most of our M&A activity as the markets down. .

Garik, one thing remember there -- as you remember when we are really spending at a maintenance level, at that point we are looking at DD&A numbers closer to 175 to 180 and we are looking at DD&A numbers today closer to 70 just to put some scope to that. .

Okay, thanks for the color. I guess switching to cement and cement pricing. You saw a nice sequential increase in the second quarter of ownership of the TXI assets.

Just wondering if you can help parse out how much of the sequential price increase was just a low price to legacy projects rolling off so you had favorable project mix as opposed to organic price increases that we are putting in the market throughout the course of calendar 2014?.

Garik, it is tough to parse much of that I can tell you. Obviously the order projects are rolling up now with pretty quick rapidity. Obviously, we came in and put a $10 a ton increase in that market. And Texas is sold out market. And we are going to do more of same and we made that clear to our customers.

And we are in very good places in that market place. So I would say the order prices are rolling off and what you are seeing going forward should be just true real sequential movement. .

Got it, thank you. And then my last question is respect to your cost guidance. You provided some of the sensitivities around diesel in your consumption.

But unit cost guidance is for small decline, just wondering how much of the potential diesel benefits you do have embedded in your formal guidance for a cost in 2015?.

Garik, we have included I would say about $20 million of embedded diesel improvement in our forecast and we actually -- you think about when we do our planning, we do our planning in the October timeframe, so we are going to use energy prices as of that time, so there has been obviously a rapid decline from that point in time to the end of 2014 but we've kept that diesel price in our plan with all but about $20 million of that.

.

Our next question comes from Jerry Revich with Goldman & Sachs. Your line is open..

Hi, good afternoon. I am doing well, thanks. How are you? I am wondering if you could talk about which chemicals and LNG projects are within your target markets in Texas and maybe you could outline which of them are via truck versus rail, just help us understanding how you are positioned on those..

I'd tell you what; I don't want to talk specific project by project. What I can tell you is if we are looking in South Texas, there are four major energy projects, is one major DOT project and if I just look at those all by themselves I can see the prospect of 2.5 million tons of aggregates on those.

If we look at Houston, I can see a 11 different projects there with well over 2 million tons required, Houston road project separate and distinct from those other private projects, six major road projects over 4 million tons on those.

And then back to the conversation we were having around infrastructure and specifically what's going on in North Texas. We are looking at projects in Dallas and Fort Worth in North Texas; they will call for almost 9 million tons of aggregates.

So these are big projects all over the state, big tonnage and it makes us feel awfully good about where we are. .

And how long are the infrastructure projects I guess we are hearing from some of the REITs around Texas that new activity for them in 2016 will slow and I am wondering do you have enough visibility on the public side to really drive growth into 2016 or for 2016 at least based on what you see even if the private side slows?.

All right. If I am looking on I-65 and 69 in Houston just starting to supply the project on US- 290 in Houston just starting to supply the project on state highway 288 in Houston, we are just starting to take bids on the Grand Parkway on another leg of it will be coming out again in May.

So a lot of these projects, Jerry that I am talking about are projects that have multiple years ahead of them. And they are just starting. So I am not really speaking to jobs that I feel like to be going away in near terms. These are jobs that have likes to them. .

Okay.

And then I am wondering if you could just talk about the pricing actions in cement and aggregates, and I believe you are planning a significant increase in January 1 for aggregates in Texas and then maybe you can comment on when --did you notify customers about next price increase in Texas, cement I think the general market expectation is for another round of increase around margin, I am wondering is that consistent with your schedule.

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I mean that's the conversation we certainly going to having with customers. Again going back to the conversation we had a minute ago, these are markets they are in large part sold out. And DFW in particular to market that showed on sand and market that's long on really big projects.

So we will certainly continue to push price along in these markets simply because of where they are. And the effect that this would which we can supply them. .

And would you care to comment on the magnitude of that price increase in aggregate in cement?.

Yes. In cement, we are looking another 10 bucks a ton in the Dallas and in Texas markets.

And in aggregates in that market place, we came back at a mid year price increase and Dallas we worked last year, we are coming into this year, it is going to vary by product but you could be looking anywhere from on the low end of $0.50 a ton to a high end of close to a ton to a couple of bucks a ton..

And then in terms of just a path to get to full utilization in the Texas cement operation.

I guess based on the bookings in hand, do you anticipate you will be at full production rate in 2015? Can you just give small color there please?.

I think we will continue to drive full production rate. Here is what full production rate is going to look like for us, Jerry. We are looking to be at 7 million tons by 2017, so here is the way that I would think about it.

We are going to look in 2015 to add probably 250,000 tons in Texas that should be about 200,000 tons at Hunter, and 50,000 at Midlothian, in 2016 looking to come back and add another 300,000 tons probably about 140 at Hunter, , 160 at Midlothian and by 2017 looking to add another probably 250,000 tons in Texas.

That's going to give you bridge to what we say is 7 in 2017..

And Jerry this is a reminder. You don't just get those efficiencies at a drop of a hat. You have to work through them as you go through planned outages at the various plants and facilities..

Okay.

And maybe you could just say a bit more on that last point just calibrate us on how we should think about seasonality and for the cement business 2015 versus 2014, you had a very good fourth quarter despite the maintenance work and you just help us understand which are the seasonally weaker versus stronger quarters in 2015 since the TXI reporting was a bit off schedule from yours?.

It is really going to be more driven plans when the outages are. So if you look at total outages in 2014 we had about $30.5 million spent at the cement operations in 2014. I think you should expect similar cost call it little bit north of $31 million in 2015.

So what we are looking at is in Q2 and Q4, we are probably looking at nature outages in Q1 and Q3, we are looking at smaller outages. So the way that I would say major outage defined that is something that's in the zip code of plus $4 million and small outage somewhere being between $1 million and $2 million. .

Yes. If you look at in the $30 million number that we gave you for 2014 was obviously annualized. We didn't incur $30 million in the second half 2014. So the TXI business had $30 million at calendar 2014 outages expect $31 million in 2015..

Our next question comes from Keith Hughes, SunTrust. Your line is open..

Thank you. You might address this in couple days at the Analysts Day but I was intrigued with your question of using cash flow to fund this repurchase program. If that something you are going to cover, I am not going to make you go over the numbers on the call, but generally how are you going to get there? I'm having a hard time with the math..

Well, I mean I don't have your model in front of me but just based on our view of the cash flow projections of the business, you got to take into consideration the minimal cash taxes that we will be paying over the next two years.

We believe that there will be sufficient excess free cash flow to generate the $1 billion to $2 billion over the next three years that we would need to execute against this repurchase. So we can talk more about detailed..

Keith, remember the other piece of that as well. We did identify excess properties at TXI. .

Good point..

And as we come through and sold those excess properties too that will play into this. .

Okay.

Do you have an estimate amount what those are going to be?.

We talked about them at the time of transaction that would be $100 million plus minus..

So that as a change, you give as change. .

Correct. .

Okay.

Second question when you got some very bullish nonresidential discussion here we talk about one about Gulf Coast and Texas construction, is there any other areas in nonresidential that you feel be improving in 2015 versus what it is on 2014?.

I think what we are seeing is we are seeing across the enterprise now Keith because what's happened and you have seen it too in Atlanta and other markets, that's going to tend to follow housing with a lag.

And in markets that you are seeing good employment dynamics and now you got North Carolina and Georgia and Florida all with good employment dynamics, all with much better housing dynamics and now what we are seeing is we are seeing the change on nonres moving in those states exactly as we would have anticipated.

So we continue to see strong momentum and growth in markets like Texas. Good momentum and growth in markets like Colorado, increasing momentum and better growth in markets like Georgia, South Carolina, North Carolina and Florida. .

Our next question comes from Ted Grace with Susquehanna. Your line is open..

Hi, it is Ted, congratulation on a very impressive quarter. I was hoping just talk about kind of the 2015 EBITDA guidance. So they really focused on the quarter aggregates business.

Anne or Ward, can you just walk through kind of how you would encourage people to think about the flow through rate just for the aggregates business and maybe you help dimensionalize with diesel dynamics that will be -- from the standpoint of kind of when we normally think about call it 50% to 60% flow through rates for the core business ex pricing, and you said that over normalized, you never said that that's kind of target given here but could you just give us a little hand holding kind of either how people should be thinking about 2015 and to work the key variable that get you between 825 and 875, is that volume depended more than anything, is the synergy dependent more than anything just to the degree you can kind of flesh that out that will be great.

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But the primary thing I think some of that is I think synergy certainly helps with that. I think the more powerful element of that really is when you are coming back and you are starting to see the Eastern United States perform a little better. I mean here is the way that you can think about it.

We actually for the full year in the Mid - Atlantic division so less tonnage in 2014 than we sold in 2013. Now we are seeing then market get much stronger going into 2015, we made more money in Mid Atlantic on last tonnage in 2014 than we did 2013.

So our point is simply this with that type of volume momentum now in those markets and with that type of performance in those markets, we feel like that could be awfully powerful to this business. And again what we are seeing particularly in North Texas around infrastructure, we think it is a great story.

And again to your point, we are seeing lower occupancy rates in nonres than we've seen in Dallas in close to a decade right now.

So when we look at what's going on sold out cement market, what we can do it pricing in that market but to your point what we can do in aggregates with synergies in TXI and an emerging strength in the South East and the Mid Atlantic group is performing more strongly, that's the key to it.

That's the part of the country as you know Ted that has been the slowest to come out of this. And that's the part of the country that's the most disproportionately profitable for us particularly in heritage aggregates when it is performing in the more normalized way. .

And if we look at the kind of booking of 825, 875, Ted, I mean obviously where our energy costs wanes for the course of the year, if energy costs were the same exactly as they were at the end of 2014 throughout the course of 2015, that 275 number pretty easily achievable.

Pricing up or down one way or other and then really it back to Ward's point, it is improvement that we began to see in the back half of the year in that Southern lower right quartile of the United States. If that continues I think you can see a strong recovery in that EBITDA line. .

Would you be willing to kind of state --.

But I will point, I would point out Ted if you don't mind, one of the challenges I believe that we are going to have as we move through the course of 2015 is the fact that our integration of TXI is progressing very smoothly to the point where it is becoming difficult to discern one operation from the other. .

Which is the way it should be..

Which is the way it should be. So parse now where those synergies are, they are there and you can see them in the results so whether they are coming from the fact that we are using a TXI Bridgeport Quarry or the Martin Marietta Chico Quarry, it is getting tougher and tougher to tell because these operations are becoming more and more seamless. .

That makes sense.

Would you be willing to plant a flag stake kind of like just to give us a mid point this is flow through rate on the aggregate business people should use?.

No. .

No, okay. Fair enough.

I have got one Ted but that's your job..

True, true.

So my second question would be just following up on a couple others and then we are the second highest estimates on The Street and I understand and appreciate kind of the tax shield related to NOL but cumulatively we had you generating like $1 billion something cash over the next three years which based on your comments sounds too low, I know you talked about $1 billion to $2 billion of free cash but you are talking about kind of $135 of $2.7 billion of buyback.

So I think that's what we are trying to struggle with that math, so I guess the question is are you actually implicitly telling us that the mid point, you said $1 billion to $2 billion of free cash is really more like $2.5 billion is what you are thinking of generating? If you can something organically or is that include cost of sales beyond the $100 million and I mean all granted you were to sell that or lever I guess that's what kind of I think people are trying to square up today is you are talking about find back $2.7 billion of stock at today's market price and we outlined is not free cash number that is even close to 2,000 so can you just talk about that little bit more to help us understand it.

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Ted when we do our evaluation of $1 billion to $2 billion of share buyback, if you recall I mean this stock price came happened today so $133 mark got yesterday, right. So we look at $1 billion to $2 billion buyback that we thought could generate that cash flow and at the market price before today that very easily got 20 million shares, right.

But obviously we will reassess and evaluate. We have said that it is excess free cash flow that we would generate from the business after organic capital and dividends; we will add back any proceeds from non strategic non operating asset sales through TXI. And that would be what we would deploy for share repurchases. .

Okay, maybe I was really slow to that but just to be clear, when you are saying when you set the goal of $1 billion to $2 billion that back into like a million share count number to lower stock price. .

I don't know how to answer your question, Ted. I am sorry. But as we look at the free cash flow available for the business that we thought we would generate it would be $1 billion to $2 billion. And that is -- what we have believe that we could allocate to share repurchases over the next two to three years. .

Well, thanks, I think that's what we are trying to understand. So thank you for that clarity. Good luck. Looking forward to seeing you this week, guys.

Our next question comes from Brent Thielman with DA Davidson. Your line is open..

Hi, good morning. Thanks for taking my questions. Well just back on the quarter the 12% increase from the infrastructure end market in Q4, was the majority of that from Texas or is it kind of evenly distributed among kind of Colorado, Florida and some other markets that you talked about. .

It was relatively evenly distributed. I mean here is what we got. If you are looking in North Carolina, I mean we are seeing some good projects that are underway and some good projects that are coming.

I mean in particular we are seeing some work coming up on Charlotte and work coming up in Greensboro, but again we saw better infrastructure work in North Carolina than we are seeing for a while.

Georgia, remember as you well know the T plus program has put $1.8 billion over 10 years since South Georgia primarily, so now that's starting to pull through a degree. The Florida program as you referenced is really very, very strong. I mean it is the largest DOT budget in that state's history.

One thing that's important about the state like Florida and I think it is a good model for the rest of the country, less than 30% of their DOT money actually originates from federal coffers which gives that nice staying power all the way through.

And of course Colorado as we discussed has a good DOT program supplemented by their rep program, supplemented by a lot of FEMA spending in that marketplace right now.

So you've got a series of markets in addition to what's going in Texas that have actually done quite well as you recall when we actually gave guidance last year the same time for 2014, we anticipated that infrastructure would be up and I think really a lot of people has some skepticism about it at the time and we said, where you are really matters on this DOT programs, and that's exactly what happen in 2014, that's what we think is going to happen in 2015 as well.

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And on that, so can we look at your kind of mid single digit assumption for infrastructure for 2015 is kind of a base level and then depending on some of these larger projects there maybe upside or timing of these large projects?.

I think depending on the time of these large projects I think that is probably the case. And the other thing that I would tell you is that we can come through with a multiyear highway bill. I think in some respect that could change everything.

Remember, we've been doing this in many respects moving hand to mouth on a DOT program for the better part of a decade. We haven't had a clear run on multiyear bill, and if we get a multiyear bill then I think you are clearly looking at something that we put out that's very, very safe number.

And it would likely be popped up and part of what I am encouraged by is right now for you got members of the tea party like Rand Paul looking hard to find way to put a multiyear bill out there, I think that gives us a pretty good sense of where the year maybe going. .

Sure, that's interesting. If I just annualize kind of the cement gross profit business this last quarter, I mean you are kind nearing the low end of your 2015 guidance for that segment already. And clearly had some positive near term drivers in front of you for that business.

I just wanted to be sure there isn't any sort of unusual expenses or other things we should consider as we are thinking about that for 2015?.

Hi, Brent, as you analyzed that you need to consider the fact that in that quarter there were about $10 million of outage cost that would only replicate likely in two of the four quarter in 2015. .

Okay.

And that was back to the comment that I gave for Jerry and that was really if you are looking -- you should expect old and summer costs on outages but in 2015 you should look forward Q4 and Q2 to have some major outages in Q1 and Q3 to have smaller outages.

Does that help?.

Our next question comes from Craig Bibb with CJS Securities.

Good to be with you on the phone. Could you -- your estimate of Texas industry synergy is now 40% above your initial estimate.

Can you able to breakdown the $100 million in savings you expect now?.

I think the primary things that are happening SG&A numbers haven't changed. What's gotten more robust procurement is gotten more robust, operation is gotten more robust. So those primary areas that you would imagine.

If you would think about in these terms the two big quarries that we picked up, the Bridgeport that is literally next door to our Chico operation. And their Mill Creek operation and cleverly our Mill Creek operation delivering next door to each other.

Those now operates a single quarry and the efficiencies that we are getting from that operationally and otherwise are very significant in addition to procurement.

So basically the markers that we put down on SG&A and otherwise that we knew we would be getting, they done exactly as we would have thought, the operation side of it has come through better, is come through faster. .

The planned buyback sizable, you gave in -- given some guidance in terms of maintaining your debt to EBITDA, but you are buying back a lot of stock. Do you have a goals kind of across the three years of the planned buyback, are you think in terms of 2% a quarter or any broad strokes of --where you would like to climb up --.

We will give you a good readout of it on a quarter by quarter basis. A lot of it is going to depend on how the end line business is performing. A lot of it is going to depend on what opportunities are out there as well because the primary thing that we want to make sure we do is create value and buying share back creates value.

Doing the right transaction creates value as well. So it may not be a perfectly linear buyback you should expect it to be. But we will come back and we will tell you quarterly what it looks like..

This concludes our question-and-answer session. I would now like to turn the call back to Ward Nye for any closing remarks. .

Again thanks for joining our fourth quarter and full year earnings call. We remain committed to what we like to call our pillars of shareholder value, world class safety, ethical conduct, sustainability, operational excellence, and cost discipline and customer satisfaction.

We look forward to discussing these and other highlights with you in our first quarter results in April. See you then. Thank you very much..

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