Martin Marietta Materials Inc (MLM) — Q4 2015 Earnings Call Transcript

Good afternoon and thank you for joining us for Martin Marietta's quarterly earnings call. With me today is Anne Lloyd, our Executive Vice President and Chief Financial Officer. To facilitate today's discussion, we have made available during this webcast and on our website, supplemental financial information which we believe will be helpful. As detailed specifically on Slide 2, please remember 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. Like other businesses we are subject to risks and uncertainties which could cause actual results to differ materially. Except if it's 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 other filings with the Securities and Exchange Commission which are available on both our own and the SEC websites. Also, as a reminder, 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 supplemental financial information as well as on our website and in our SEC filings. By leveraging a full year of acquired TXI operations with our heritage business, 2015 enters the books as a record year. Specifically, we achieved record safety results, record net sales and profitability. Expanded consolidated gross profit margin, exceeded incremental margin targets for the consolidated heritage business, exceeded acquisition synergy targets in both dollars and timeline, invested capital in our business, completed several bolt-on acquisitions and returned nearly $630 million to shareholders through dividends and share repurchases. These impressive results were achieved with both tailwinds and headwinds. The tailwinds, 2015 construction markets experienced continued growth in private activity led by housing as well as the emergence of enhanced public sector activity as best revealed by a 7% increase in highway construction. Nonetheless we had a very significant headwind as 2015 saw unprecedented amounts of precipitation in our core states of Texas, North Carolina, Iowa, Georgia, and Colorado disproportionately impacting second and fourth quarter performance. By some estimates and indeed our own calculation and internal plans, multiple sustained extraordinary weather events combined with the downturn in energy sector shale development likely cost us up to $200 million in sales for the year masking the underlying strength of general construction. That underlying strength is revealed in the solid growth we see across our business with the market acceleration of the construction recovery in key southeastern markets, fueled by steady employment growth, continued private sector activity and expanded department of transportation programs. We, thus, enter 2016 with what we believe are very favorable market and operating tailwinds building upon our team's record 2015 results. These past results and future opportunities are tied to our strict and steadfast attention to cost discipline further underscoring the positive result of years of improving our operating efficiency. We are also specifically very proud of our 2015 record safety performance, a core foundational pillar of our company. We concluded 2015 with incident rates better than what had been 2014's then record results. Notably, we continue to see a dramatic improvement in the safety numbers of the former TXI operations further underscoring our successful operational and cultural integration. Safety is first at Martin Marietta. In December we completed construction of our state-of-the-art Medina rock and rail quarry near San Antonio, Texas. Shipments from Medina are expected to replace rail shipments from our Beckmann Quarry as it transitions from a distance rail and truck served quarry to wholly focusing on the local San Antonio marketplace. The Medina project was on time and on budget. The construction of this $160 million facility spanned three years, is the largest and most complex capital project in the company's history and is now the largest quarry on the Union Pacific Railroad's vast network. Medina began operation in January 2016 and we expect to ship nearly 6 million tons of aggregates this year. As highlighted in today's press release, we continue to execute against our strategic objective of securing and solidifying leading market positions in economically diverse high growth areas. In November 2015, we purchased Front Range aggregates. And last week, we acquired Rocky Mountain Materials in Southern Colorado, near Colorado Springs. These two bolt-on transactions complement our position in Metro Denver in Northern Colorado, a position we originally acquired in 2011 with our River for the Rockies asset exchange and provide attractive and leading positions along the front range of the Rocky Mountains, home to over 80% of Colorado's population. Following these recent transactions, we have added an estimated 1 billion tons of aggregate resources. Strategically four years ago we had no front range position whatsoever. Today, we are a marketplace leader with nearly 100 years of high quality construction aggregates and reaching with near and long-term favorable employment and demographic conditions. Turning to the fourth quarter performance. We established quarterly records for net sales and profitability driven by strong pricing, disciplined execution of our strategic plan and steady growth in construction activity. Importantly, all segments in the aggregates business delivered increased net sales and gross profit while expanding gross profit margin. We exceeded our incremental margin target on both a heritage and consolidated basis. Heritage gross profit margin expansion was led by the West Group with a 630 basis point improvement largely resulting from strong pricing and realized TXI synergies. As shown on Slide 7, through the end of 2015 we have realized approximately $100 million of our $120 million synergy target, reflected in both the acquired business and heritage West Group performance. We are on track to fully realize our $120 million synergy target by the end of this year. On a more granular basis, our 2015 record results were driven by strong pricing across our aggregates, aggregates related and cement businesses, as shown on Slide 8. Notably, the heritage aggregates product line delivered an increase of more than 7% in average selling price while heritage ready mix concrete prices increased nearly 10%. The acquired businesses, aggregates, ready mix concrete and cement saw price increases of 13%, nearly 11% and 10% respectively, in line with our stated objectives. For the year, heritage aggregates product line volume increased 2% and total aggregates product line volume increased 7%. This is again despite near-record recurring precipitation in five of our largest states. The Southeast and the Mid-America Groups led volume growth on the strength of recovery in Georgia, Florida and the Carolinas. The West Group which was most affected by the adverse weather conditions reported an increase in aggregates volume of 1.2%, excluding TSI-related divestitures which affect comparability with the prior year. Aggregates volume growth for the year was notable in North Texas but was somewhat offset by declines in direct shale energy aggregates shipments in South Texas. Volumes grew across all product lines with the exception of asphalt where our Texas divestiture in the fourth quarter affected year-over-year comparability. Of note, asphalt margins expanded to 28% or just over 1000 basis points, clearly reflecting improved profitability in our core Colorado asphalt business. Consolidated gross profit margin was 22% and expanded by 260 basis points for the year, led by margin expansion in all construction materials related segments. Gross profit for the heritage aggregates business increased $130 million over the prior year with margins expanding 480 basis points to 23.8% of net sales. Incremental gross margin for the heritage aggregates business exceeded targeted objectives for both the fourth quarter and full-year 2015. The incremental gross margin of 82% for the full-year 2015 was led by growth in both the West Group and the Southeast Group which achieved incremental gross margin of 135% and 78%, respectively. These are great testaments to our team's focus on controlling costs and delivering outsized results, despite extraordinary uncontrollable weather headwinds. The acquired businesses gross profit margin also expanded 300 basis points in 2015 led by acquired aggregates product line gross profit margin of nearly 27%, up from 4.6% for the comparable prior year period, reflecting synergy realization and underlying strength in both volume and pricing. Due to the September 2015 sale of our California cement business, quarterly results for the cement segments are not comparable to the prior year period and in fact comparability will be affected throughout 2016. Quarterly details for the cement business can be found on Slide 9 for elimination of the California results. However, the remaining cement businesses benefited from Martin Marietta's significant pricing improvement in 2015. Average selling prices increased 10%, aided partly by the expiration of legacy TXI cement contracts at below market pricing and the divestiture of the California business. For the year, the business generated $368 million in net sales and delivered a 28% gross profit margin. A 310 basis point improvement over the prior year. EBITDA for the business was $101 million, a $30 million increase. The magnesia specialties business was negatively affected by a slowdown in the steel industry in 2015. Steel capacity utilization was down from approximately 78% in 2014 to 71% in 2015. Full-year net sales were $228 million, a decline of $9 million or 4% compared to the prior year. The magnesia specialties team diligently managed the cost profile of the business during the year and despite steel capacity utilization declines delivered an impressive 35% gross profit margin. On a consolidated basis, 2015 delivered record net sales of $3.3 billion, an increase of $589 million or 22%. Record gross profit of $722 million, an increase of $199 million or 38%. Record net earnings of $289 million, an increase of 86% and record adjusted EBITDA of $766.7 million, an increase of 30%. The significant improvement in net earnings coupled with the absence of TXI related costs drove an increase in operating cash flow in 2015 to $573 million compared with $382 million in 2014. Operating cash flow per share of $8.55 improved 8% when compared to adjusted 2014 which excludes the cash impact of TXI-related expenses. We invested $318 million of capital during the year, including $78 million related to the new Medina rock and rail quarry. For the year, we returned nearly $630 million to our shareholders through the combination of repurchasing 3.3 million shares of our common stock together with our dividend. As a reminder we have board authorization to repurchase up to 20 million shares. Finally, our ratio of consolidated net debt to consolidated EBITDA for the trailing 12 months ended December 2015 was 1.9 times, in compliance with our leverage covenant and below our targeted leverage of two times. In summary, 2015 was a remarkable year for Martin Marietta and despite being tempered by extraordinary weather that cloaked our true earnings potential, our team is poised for an even stronger 2016. We are confident we have the foundation in place for improved growth, profitability and performance. We will now look to the future and discuss our 2016 outlook which we highlight on slides 11 through 13. Initially, you will note some improvement in our expected growth as compared to our very early thoughts provided in third quarter 2015. Our 2016 outlook now reflects growing underlying demand and strong pricing across our entire geographic footprint. National employment growth is a stimulus for construction activity remained robust throughout 2015 surpassing the pre-recession peak by nearly 5 million jobs. These job gains in addition to contractor backlogs resulting from historic 2015 rainfall, should fuel growth and further recovery of the U.S. construction industry in 2016 and beyond. Public sector growth is expected to drive mid-single digit volume increases in our infrastructure business which accounted for 41% of our aggregates demand in 2015. The growth reflects continued state level funding initiatives that are positively impacting several of our key states, including Texas, North Carolina, Iowa, Georgia and Florida. For example, in Texas, nearly $10 billion of department of transportation lettings are planned, up from $6.1 billion in 2015. Dallas and Fort Worth alone are the beneficiaries of four major design-build projects aimed at mitigating that area's congestion and improving traffic flow. There is also significant and continuing infrastructure work in and around Houston. Additional evidence of state-level infrastructure investment tailwinds is revealed by recent project scheduling changes announced by the North Carolina Department of Transportation or NCDOT. Specifically, after the passage last year of various new state funding initiatives, NCDOT announced an accelerated schedule for 90 highway projects. This example is consistent with our articulated expectations around state construction project backlogs. In addition to state level initiatives, we now have the five-year, $305 billion Fixing America's Surface Transportation or FAST Act. Enacted in December 2015 to provide states with the required funding certainty for the first time in nearly a decade to commit to a backlog of longer term projects needed to improve and expand America's transportation network. We believe the FAST Act along with state level funding initiatives will drive large multi-year, aggregate intensive construction projects. Further, it's also likely we will see meaningful projects in rural areas that have been infrastructure starved during the last decade and will now be better able to develop new avenues for growth and commerce. Shipments to non-residential construction projects, 32% of our 2015 demand, is expected to increase in both the heavy industrial and light commercial sectors leading to an increase in aggregates volume in the high-single digits. The light non-residential construction sectors, primarily office and retail, with demand generally tied to employment growth and residential activity. Notably, the Dodge Momentum Index is near its highest level since 2009, signaling continued growth. Further, four of Martin Marietta states account for five of the top ten and nine of the top 20 in state level employment growth including Florida, Texas, Georgia, North Carolina, Ohio, Indiana, South Carolina, Virginia and Colorado. All positive catalysts for construction activity. The heavy non-residential construction sector is primarily industrial building as well as energy and energy-related activity. We are currently supplying several large energy-related industrial and infrastructure projects along the Gulf Coast and expect our project backlog to grow, thus largely offsetting the declines in direct shale exploration activity. We believe direct shale activity reached a maintenance level in the fourth quarter of 2015 and should sustain at that level throughout 2016. Of course, results for the first and second quarters of last year reflected higher than maintenance level consumption and are expected to affect comparability to the first half 2016 results. The residential end-use market accounted for 17% of aggregate shipments in 2015 and increased 20% as compared to 2014. We expect a double-digit volume increase again in 2016 reflecting the continued steady recovery of residential investment as a result of positive employment gains, historically low mortgage rates, significant lot absorption and higher multi-family rental rates. New housing permit activity was up 12% in 2015, indicating further future gains in housing construction. Importantly, Texas, Florida, Colorado, Georgia and North Carolina, each ranked in the top ten states for housing starts. Finally, to conclude our discussion of 2015 end-use markets, the ChemRock and Rail market represented the remaining 10% of aggregates volume and is expected to remain relatively flat to modestly down in 2016. We will now focus on Texas where we continue to be encouraged by the resilience of the broader marketplace. In short, we anticipate increasing overall demand driven by solid population and employment growth. Construction activity in our larger volume markets, principally being the vibrant corridor at Dallas, San Antonio, and Austin, is expected to grow throughout 2016 and beyond led by multi-year infrastructure activity, a strong residential marketplace and solid non-residential construction. South Texas of course has seen a decline in shale oilfield activity, thus reducing our direct shipments by 2.5 million tons in 2015. Again, much of this decline is expected to be offset by the combination of large multi-year energy projects as well as new and ongoing energy corridor road repair work. In late 2016 or early 2017, we will open a new aggregates facility on Martin Marietta owned property at the Hunter cement plant northeast of San Antonio. This undertaking will allow us to transition from our least and nearly depleted New Braunfels quarry only ten miles away to a permitted location with over 400 million tons of quality aggregate materials providing improved access to local market. The Hunter aggregates quarry will be an additional synergy from the TXI acquisition that will benefit our company in 2017 and beyond. Our expectations for 2016 volume levels in Houston have moderated from 2015 levels where we saw an 11% increase in aggregate shipments. We now expect the aggregate volume in that marketplace to be broadly flat with any potential upside being spurred by large infrastructure projects and any downside being driven by a sharper deterioration into Houston's economy. That said, it's important to remember that our principal Texas markets are located in north and central Texas and not materially impacted by Houston market conditions. The Portland Cement Association or PCA forecasts modest demand growth in Texas in 2016 followed by stronger growth in 2017. We currently expect 2016 cement volume to increase 8% to 11%. We have previously announced a cement price increase of $12 per ton effective April 2016. Based on the expected flow of shipments, we will likely realize a year-over-year average selling price increase of approximately 9%. Both volume and price growth forecasts exclude the 2015 results of the divested California cement business. Profitability is forecasted to increase by an estimated $30 million in 2016. On a consolidated basis, 2016 is expected to deliver record-setting results, including net sales ranging from $3.5 billion to $3.7 billion, expanded gross profit and expanded EBITDA, as we have consistently stated our capital allocation priorities remain unchanged. They are investing in aggregates-led acquisitions, organic capital investment to ensure safe, environmentally sound and highly efficient operations and returning cash to shareholders in the form of a sustainable meaningful dividend and share repurchases under our existing authority. To conclude, we are optimistic and excited about 2016. We enter the year with an enhanced foundation for further growth and outlook for improved business conditions across the vast majority of our markets led by solid private sector construction activity and a newly reinvigorated public sector. Our team remains focused on the careful execution of our strategic plan, wholly committed to our core foundation of pillars and dedicated to delivering increased shareholder value. If the operator will now give the required instructions we will turn our attention to answering your question.

My first question is about visibility in general, especially regarding states that have enacted new legislation, which we have already observed has led to a notable increase in tax receipts for infrastructure. Specifically for Georgia and North Carolina, considering the changes made in 2015, have you noticed any volume increases from the legislative initiatives passed last year? Thank you.

Kathryn, the short answer is, we are going to see it. Think about North Carolina. They have basically put in more money at the end of the year last year, and to be specific, that was an additional $700 million over two years. The other thing that North Carolina has is spending that we will see voted on later this year. It's a $2 billion building bond proposed as well. So I think to answer your question very specifically, when our legislature came out with the additional $700 million, we did see the state implementation plan move forward 90 projects up into the year. So we do anticipate seeing that. So, yes, we are seeing activity that we believe will take aggregates volume later in the year. And clearly, what's effectively doubling the Georgia budget, adding that additional $900 million to it, we will clearly see amped-up activity in Georgia. Remember, we were going to benefit too by the planning that was put in principally in South Georgia a couple of years ago. So now what we will see, I believe, is greater activity across the State of Georgia buttressing the activity that we were seeing in South Georgia. Increased activity in North Georgia principally around Atlanta and we know we will see more activity in North Carolina as well. I think it's worth noting, Iowa did put in a $0.10 a gallon gas tax increase last year, Nebraska did as well. We are going to see the benefits of Prop 1 money in Texas and we are seeing near-record lettings in Florida this year. So we are seeing new money in a number of states and we think as we see more money coming in a number of states including states like Indiana where Governor Pence has basically said he would like to see another $1 billion put to infrastructure in that state. And we have got 12 different states right now seriously considering gas tax increases in addition to what Georgia and Iowa asked. So that gives you a little bit of a feel across the patch, Kathryn.

And just to clarify. So if you look at all these initiatives in aggregate, are we in the early innings, middle innings, of seeing the dollars flow through? I would assume the early innings but you're the one in the field seeing the volumes flow through.

No. Kathryn, we are in the early innings. And I think part of what you are seeing too, it's not just early innings. It's early innings of a different type of work. Think of it in these terms. For much of the last decade, we have really been living more on private work than public work. And private work is not as aggregate intensive as public work is. And what we are seeing now is a transition away from repair and maintenance on public work to a very different type of public work that I do believe we are in the early innings of. And I think you and I both have to sense that the more that we are building new lanes, the more that we are building new highways or new roads and the more rural parts of the state are looking to add capacity and open up new lanes and corridors for business, that’s awfully powerful to our business and I think very much aggregate intensive. So early, yes; more aggregate intensive, yes.

Okay. And then next two questions. One, I appreciate your giving some clarification on increasing your end market growth projections from Q3 but could you frame the outlook that accounts for the relatively large increase or improvement in the difference? And then the final question would be on cement margins. If you could just help us think about, it does look to be a big jump and maybe help us understand the improvement in cement margins. Thank you.

Sure, Kathryn. Let's talk about the first part of your question first. I think what we are seeing is increased contracted backlogs across our entire footprint. We have also seen the awarding of several large energy-related industrial contracts, particularly along the Gulf Coast. I think what we were seeing in the fourth quarter, when it wasn’t raining the fourth quarter looked very powerful. I will give you a sense of that. I have been in Texas three times over the last month and a half and was down there for part of the holidays. And when I'm talking to contractors in that marketplace, literally in the week of Christmas when it was dry, they were saying they were having really record days even at that time of the year, which I will tell you is unusual but gives a sense of what's out there. And the other point I think goes back to the very beginning of the conversation that we had and that’s just simply more accelerated infrastructure activity in our key states. So we are looking at those $10.1 billion worth of activity potentially in Texas, more in North Carolina, more in Iowa and more in Colorado. And remember what we said about Colorado, the primary thing that was keeping us from doing more in Colorado is we needed more business in Colorado. And now what we have been able to effectively do is extend our march down the front range into the southern part of that as well. So I think all those together have put us in a position that we feel considerably good about the way 2016 is shaping up. I think as we go back to the second part of your question that is relative to cement. I think several things are going to happen. One, cement was badly affected last year by the rain. I mean it's hard to run a cement business which is a 24x7, 365 business, if you need to take it down more than you would wish. And keep in mind, our aim is to be a price leader in that state and our view was, we would rather take those kilns down rather than keep the kiln going and do something that we thought was going to be foolish relative to the selling price in that market place. In large part, we believe we are going to have greater efficiencies in cement this year but we also think we are going to see better pricing in cement this year. You saw a little bit of share movement in our business in cement. And the fact is, we were willing to see that share movement move because that was really driven by two distinct players in the marketplace. Holcim had brought on a kiln, again, that they had idled for a while at Midlothian and they were coming back into the marketplace. And Argos, as we discussed, was bringing in some material into South Texas. We believe as we go into the year, that everybody is likely to be relatively full. We believe we are going to be efficient. We believe we are going to be successful on our pricing increases and we think by the time we put all of that in place, we are looking at very nice improvement in the cement business. And by the way, we are looking for a very nice improvement in the ready mix business as well. I think those are your principal drivers in Texas.

Kathryn, the only thing I would add is that when you are looking at comparability between 2015 and 2016, you have got to remember the impact of the California operations which were really still not at any kind of recovery trajectory.

I wanted to ask first about incremental margins. You guys had very strong margins in 2015 but your guidance for 2016 is in the 55% to 65% range, incremental gross margins for aggregates. Is it possible you're being conservative there?

No. We have always said that that was going to be on average, so we are really not changing what we said over time. Fairly we exceeded it in this last quarter. I think much of what we said in the past is that’s what you are going to see on average across the enterprise. But we also said it would likely move much more aggressively if you saw growth coming in the eastern part of the United States, particularly in Mid Atlantic and southeast. And if you go back to really put some of those numbers look like they were most impressive. That’s what you are seeing. And to answer your question specifically, I think we are going to see the eastern United States on a percentage basis growing in ways that we haven't seen over the last several years. That’s certainly the indications that we are getting on activity on Georgia, on Florida, on South Carolina and North Carolina. And I think the quick answer is Adam, if we see those areas of the country growing the way that we believe that they will, I will just say this much, the incremental margins will be a nice story again.

Okay. And then I just wanted to ask on your end market outlook for 2016. The infrastructure piece and the non-res piece improved from what you said in early November. So I just wondered if you could expand on what got better, maybe it was just stuff that got pushed because of the weather.

You know what, I think several things. Number one, we didn’t have a highway bill when we were talking about it before. And I think the fact that the highway bill is actually spurring a lot of increased activity. I don’t know how much of that’s going to hit in the early part of '16 but I think you might see some of that actually coming through at the backend of '16, which would be earlier than you would typically see. But I think equally when you come back and consider the significant state initiatives, and again, we saw initiatives coming out of North Carolina late in the year. We are seeing a big Texas number. We are seeing that gas tax increase pull through in ways that we are excited about in Iowa. Again, another record, near-record letting year coming up in Florida. I think all of that helps on the infrastructure side of it particularly. I think if we go to non-res, I mean here is a statistic that’s striking to me. Think of it in these terms. Shale volumes were down 1.1 million tons in the quarter, as you heard me say in the teleconference. But net South Texas shipments actually increased and they increased by large infrastructure and large manufacturing projects. And part of what we are seeing on the non-res side is an awfully nice surge in non-building. So I would encourage you to go and take a look at what's going on in other non-building. Again, power plants, gas, communications, those types are really very aggregate intensive jobs. Non-building, looking at the trailing 12-months through November was up 19% and a lot of that activity is concentrated in the Gulf. So, again, if we are coming back and seeing what we feel like is a really, really attractive DOT projects and awfully nice non-res projects, that’s helps. The other piece of it, candidly, we saw a lot of projects awarded in the fourth quarter and one of the things that I would like to see is at certain levels it's probably frustrating to our division presidents, but we have signed delegations from here to know exactly what they are bidding on. It's not that we don’t trust what they are doing, we just like to see the sheer level of that activity and we saw a lot of that activity before.

In the release, you guys said that your non-res market was 32% of your shipments in the fourth quarter and was up 3% for the year, and that light non-res was up 27% for the year. Can you split out light and heavy in terms of the volume split in the quarter and talk about which way each one went in the fourth quarter?

You know, here's the easy way to think about that, Todd. The primary thing that I want to think of on the heavy side is what was going on relative to shale. I mean that’s really your show on what was going on on the heavy side. I mean to give you a sense of, to walk through the quarters, in Q1, to shale, we sold about 1.2 million tons. In Q2, to shale, we sold about 1 million. In Q3, to shale, about 830 and in Q4 to shale about 521. Remember in my prepared comments I said I thought we were getting to maintenance levels. We view that 500,000 tons a few quarter as a maintenance and that goes back in part to the comment that I think I was sharing with Adam before, when I said look, we saw shale volumes down 1.1 million tons in the quarter but South Texas shipments actually up. So if you go the one part of the country, they would have felt more acutely the downturn in shale than anybody else. And you brush it away and you say that their volumes were up. That gives you a good sense of what's happening on that lighter side of it, Todd. And then back to that non-building piece of it as well. So the resilience that we are seeing there across our marketplace is pretty comforting to us right now. And we are liking what we are seeing. Does that help?

It does. It does. Thanks for that. Not to beat a dead horse, but just to make sure we're clarifying. If you think about the swing factor from the non-res outlook up slightly in the preliminary outlook that you gave back in November to the high single-digit growth that you're talking about today, a big swing factor, it seems like it's not only resilience there on the light side, but also the fact that there were some significant actual contract signings that you saw in the fourth quarter. Is that fair?

That's very fair. It goes back to that notion that we talked about relative to delegations. We have been signing a lot of them. And the other thing is, number one, it's what we're seeing. And that's what's most important. Equally, it's awfully consistent with what FW Dodge is seeing. So if we look at their latest forecast which came out on January 26, they are seeing non-res up in those same types of percentages that we are talking about. So, again it's nice to see it. It's also nice to go to third parties and said that their data is saying the same thing that our life experience is saying.

In the release, you guys said that your non-res market was 32% of your shipments in the fourth quarter and was up 3% for the year, and that light non-res was up 27% for the year. Can you split out light and heavy in terms of the volume split in the quarter and talk about which way each one went in the fourth quarter?

You know, here's the easy way to think about that, Todd. The primary thing that I want to think of on the heavy side is what was going on relative to shale. I mean that’s really your show on what was going on on the heavy side. I mean to give you a sense of, to walk through the quarters, in Q1, to shale, we sold about 1.2 million tons. In Q2, to shale, we sold about 1 million. In Q3, to shale, about 830 and in Q4 to shale about 521. Remember in my prepared comments I said I thought we were getting to maintenance levels. We view that 500,000 tons a few quarter as a maintenance and that goes back in part to the comment that I think I was sharing with Adam before, when I said look, we saw shale volumes down 1.1 million tons in the quarter but South Texas shipments actually up. So if you go the one part of the country, they would have felt more acutely the downturn in shale than anybody else. And you brush it away and you say that their volumes were up. That gives you a good sense of what's happening on that lighter side of it, Todd. And then back to that non-building piece of it as well. So the resilience that we are seeing there across our marketplace is pretty comforting to us right now. And we are liking what we are seeing. Does that help?

It does. It does. Thanks for that. Not to beat a dead horse, but just to make sure we're clarifying. If you think about the swing factor from the non-res outlook up slightly in the preliminary outlook that you gave back in November to the high single-digit growth that you're talking about today, a big swing factor, it seems like it's not only resilience there on the light side, but also the fact that there were some significant actual contract signings that you saw in the fourth quarter. Is that fair?

That's very fair. It goes back to that notion that we talked about relative to delegations. We have been signing a lot of them. And the other thing is, number one, it's what we're seeing. And that's what's most important. Equally, it's awfully consistent with what FW Dodge is seeing. So if we look at their latest forecast which came out on January 26, they are seeing non-res up in those same types of percentages that we are talking about. So, again, it's nice to see it. It's also nice to go to third parties and said that their data is saying the same thing that our life experience is saying.

In the release, you guys said that your non-res market was 32% of your shipments in the fourth quarter and was up 3% for the year, and that light non-res was up 27% for the year. Can you split out light and heavy in terms of the volume split in the quarter and talk about which way each one went in the fourth quarter?