Good morning, ladies and gentlemen, and welcome to the Martin Marietta Fourth Quarter and Full Year 2017 Earnings Conference Call. My name is Jonathan, and I'll be your coordinator today. At this time, all participants have been placed in a listen-only mode. A question-and-answer session will follow the company's prepared remarks. As a reminder, today's call is being recorded. I would now like to turn the call over to your host, Ms. Suzanne Osberg, Vice President-Investor Relations for Martin Marietta. Ms. Osberg, you may begin.

Good morning, and thank you for joining Martin Marietta's fourth quarter and year end 2017 earnings call. With me today are Ward Nye, Chairman and Chief Executive Officer; and Jim Nickolas, Senior Vice President and Chief Financial Officer. To facilitate today's discussion, as we have done in the past, we have made available during this webcast and on our website supplemental financial information. As detailed on slide 2, today's teleconference may include forward-looking statements, as defined by securities laws in connection with future events, future operating results or financial performance. Like other businesses, we are subject to risks and uncertainties, 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 earnings release and other filings with the Securities and Exchange Commission, which are available on both our own and the SEC Web site. As a reminder, all margin references in today’s teleconference are based on total revenues. Any non-GAAP measures discussed today are explained and reconciled to the nearest GAAP measure in our supplemental financial information, which is also available on our Web site and in our SEC filings. I will now turn the call over to Ward.

Thank you, Suzanne, and thank you all for joining today’s teleconference. As announced in this morning’s release, 2017 was a record setting year for Martin Marietta. For the first time, we generated earnings before interest, taxes, depreciation and amortization or EBITDA of over $1 billion. Notably, this achievement coincided with the best safety performance in our company’s history. In addition to these milestones, we establish records for revenues, profitability and earnings per diluted share for both the fourth quarter and the full year. Our record performance, which was achieved without aggregates volume growth, validates the steadfast commitment to our core values and the disciplined execution of our strategic plan. Our financial performance starts with operating our facilities safely. I’m proud to report that we surpassed world-class loss time instant rate levels company-wide. Further, half of our divisions exceeded world-class total entry instant rates, a remarkable safety performance is rewarding in its own right. That said, elevated safety awareness across the company has also reduced downtime from workplace incidence leading to higher revenues and profitability. For the full year 2017, we delivered the following record consolidated results. Revenues of $4 billion, EBITDA of over $1 billion, gross profit of $972 million, earnings from operations of $700 million and earnings per diluted share of $11.25, which includes a one-time non-cash tax benefit of $4.07 per diluted share from the recent Tax Cuts and Jobs Act for 2017 or 2017 Tax Act. Importantly, we achieved full year record earnings per diluted share of $7.18, excluding this one-time benefit, an increase to $0.55 compared with 2016. Geographic positioning, price leadership, prudent cost discipline and reinvestment in our business through appropriate capital allocation contributed to these record results. Our performance is all the more noteworthy given the externally driven volume headwinds that limited shipping and…

[Operator Instructions] Our first question comes from the line Kathryn Thompson from Thompson Research Group. Your question please.

First is just on system guidance. Could you give a little bit more color in terms of important drivers for assumptions, including the rising diesel costs and the ability to make-up for those lost volumes in 2017 from storms? Thank you.

We see volume better in every major market in which we operate. So if we look across our space, we don’t see volume down anywhere. If we look at the elite eight states in which we operate meaning, Texas, Colorado, North Carolina, South Carolina, Georgia, Florida, Indiana and Iowa, we see all those states up pretty markedly. And we don’t see them up in one area, we see infrastructure being better, we see non-res better and we see residential being better, to answer your question very directly. With respect to energy itself, we do see diesel going up year-over-year. Based on the guidance that we put out at least baked into our guidance, let’s not call it out specifically. We are seeing the diesel for the year be up around $0.44 per gallon in ‘18 versus where it was in ’17. The quick math is going to tell you that’s going to be plus, minus an incremental $20 million. And in case you’re wondering we used about 44.8 million gallons of diesel fuel last year. So that’s how we work out to those numbers. I hope that’s helpful.

And I assume are you -- you're assuming that you will or won’t make up for those total loss volumes from storm?

What we’re assuming is that we will make-up some of them. We’re not assuming that we’ll make-up all of them. And again, we’ll just see how that flows through but at least as this point that’s how we bake that in Kathryn.

Given a little choppy end to the quarter, there is some part says that there are many parts in the U.S. that did really quite well. But there were certain ones including Texas where they just can’t seem to catch a break when it comes to the all important work. So if you look forward into 2018, could you walk through either the inter quarter cadence from Q4 ’17 and may be what we’re looking forward into early 2018 and with that may mean in terms of the longer term look.

Kathryn, if you go back over the last two years what we’ve seen in both '16 and '17, we’re actually pretty mild Q1. So we’ve seen better Q1 on a compared basis for last two years than we would have seen historically in the company. So here is what I’ll tell you. If we go back and look at the last couple of years and I'm looking at these percentages as the percentage of the year. So we would have seen revenues in Q1 in ’16 and ’17 of around 21%, we would have gross profit in Q1 in '17 around 16% and EBITDA about 15% of full year. Now if we go back and say really what does it look like over a longer period of time and take a look at what that snapshot looks like, it looks more like revenues 17%, it looks more like a gross profit of 8% and an EBITDA of around 8%. One thing that I’ll remind you and we talk a lot about this, but it’s important to remember at this time of the year in particular, typically the first quarter is made or broken in the last two weeks of March, I mean that’s what we’ve seen forever, that’s usually when the construction season starts in earnest. So what I would encourage you to think about Kathryn is the more typical cadence to the year and what I’ve just given you at least relative to Q1 the last couple of years, but more likely Q1 over a longer term is the way that I would think about it. So I hope that helps.

And then finally on fly ash, so you’ve been watching shortage of gypsum and also fly ash throughout the U.S. impacting different industries, and we definitely noticed a tightness and ability to get fly ash in State of Texas in particular. Is this something that you’re also seeing and also clarify how that may or may not impact your cement operations?

Well, the short answer is yes, we're seeking it. And I think it will provide some choppiness for ready mix producers in parts of the United States. Keep in mind we're the largest producer of cement in Texas. So I think you can provide some choppiness for people for let's call it six, seven, eight weeks, I think it certainly could. From a cement suppliers’ perspective, look if there is not fly ash, we're happy to fill that void with cement and it think we can do that just fine. So I think we're sitting in a pretty good place from that prospective Kathryn.

Your next question comes from the line of Trey Grooms from Stephens, Inc. Your question please.

First one from me Ward is on the aggregate selling price guidance of 3% to 5%. Are you expecting any product mix impact within that range? I know there was some expectation I think for some more base stone to be shipped this year maybe than what we saw last year just based on the projects that are out there. Is that still the case? And is that baked into the range? And if so, what’s going to be the approximate impact you’re expecting there.

It certainly is. There are two things that I would tell you are in that, and it’s hard to tease it all out with specific trade. But I do think you're going to see more infrastructure work this year than last year. I think you're going to see more new infrastructure work than last year. That does mean that you're going to have more base product going up and that’s clearly on average about 30% lower ASP as opposed to clean stone that’s going directly into ready mix or into asphalt. So I think that is going to matter. The other thing that I think we called out fairly clearly is we think growth on a relative basis is going to be more robust in portions of the West. So again if we’re looking at places like Texas and Colorado, those markets are still, let’s call it, 70% of corporate average. So there is clearly some of that. So when we’re looking at the 3 to 5, you could probably take that up half return-ish or so as we look at what pricing will be if you’re really looking same on same. The other thing that I’d tell you is there are couple of things last year too that are important to remember relative to the pricing that we reported. Number one, we did see some product mix issues in Texas in 2017, because I want to remember, we did finished some large energy related projects at the end of ’16 that were principally used in clean stone. If we really do a same-on-same, you probably would have seen another percentage maybe a little bit more than that up just in the Southwest division all by itself. And we also had some excess build portfolio in many respects what’s almost the waste product that we sold or feel on a bypass job in North Carolina. And we sold about a million tons of that at $1.76 last year. I give you all that background number one as a reminder that those were in last year’s number. And two just give you a sense of how constructive, we think that piece of the business continues to work overall last year and what we feel like is very attractive outlook for this year.

And then just to understand on the tail end of seeing more base rock, which sounds like could be the case at least for some of this year behind that comes more of the higher ASP stone. Does that come pretty quickly or what’s the general lag there?

It can come relatively quickly depending on the nature of the projects. It could be anywhere from two to six months would not be unusual lag time so again, depending on the time of the year. And you make a very good point. If base stone is going down, the day in the hours going to become that asphalt or concrete is going to go on top of that base stone. So it’s important to recognize when we’re having a conversation with you around more base stone from where we sit that’s a very good sign. And it goes back to the comments that I gave in the prepared remarks relative to this being an extended cycle. And those are some of the very few reasons that we think the cycle will be extended.

Last one from me just on Bluegrass the pending acquisition there. You mentioned that it is progressing, I think you’re still looking for first half ’18 closing. But could you give us any more color around how that’s going. I know you put out some very high level detail on some volume and revenue I think through September. But any updated thoughts on around accretion or potential divestitures that maybe required or anything like that?

Well, here is what I would say. The process with DOJ is going exactly as we thought it would, so there have been no surprises there. As you may recall, we spoke last time about entering into a timing arrangement with them. So we continue to work in a fashion that we think is really constructive. We are not seeing anything from that process that makes us think about this transaction any differently than we did today that we announced this transaction. So to the extent that there are divestitures, the divestitures will not be such that they’re value disruptive to the transaction, so again exactly the way that we thought of it. We have also not changed the way financially that we think about this deal. It will be accretive on EPS and cash flow during the first full year. We’ll obviously talk to you more about that in granular detail once we own it. Since we don’t own those assets yet today, we still have to be careful about what we say in public that we have it already. But again, we're excited about that deal; we like the fact that we’re picking it up when places like Georgia are 20% below mid-cycle; we're seeing literally billions of dollars worth of work coming in Maryland; we think we're the right owner; those are the right geographies; it’s got a very bright future; and we're very comfortable with where we are in the DOJ process; and our timing has not changed on transaction.

Thank you. Your next question comes from the line of Scott Schrier from Citi. Your question please.

Ward, first question I want to ask you is how are you seeing the FAST Act and how are customers looking at that versus waiting for more certainty from a federal bill. And the same goes for some of those state measures. When I think about the mid single digit increase in infrastructure volumes, it seems very positive. It seems like it’s a step up from potentially how the conversation was growing in November when we spoke. So I'm just curious what’s giving you the conviction given the softness that we’ve seen that one that we’re able to have that level of increase. And also to touch on what you talked about last quarter, where the big theme was inefficiencies at the state DOT level. Are you seeing some of those large gems making some progress to enable mid single digit and infrastructure growth?

I guess the couple of things that I would say. Number one, I think if we generally spoke to people who are looking at their businesses at a granular level back in October and November. And so how do you feel then and how do you feel now. I think generally speaking people feel better today than they did then. And your question is why, I think for several reasons. One if we talk to our customers and we're talking to contractors, the level of work that they have and what they see ahead of them is encouraging to them. And if it’s encouraging to them and they are talking to us about supply, it’s encouraging to us. So we're hearing that from third party. Number two, if we’re simply looking at what we have in our backlog. And so if we're looking at our ready mix business in Texas today, for example, we have ready mix backlogs in Texas that are higher than any point since we’ve own that business. And remember we picked up the vast majority of that with the TXI transaction several years ago, so that what we’re seeing there, it’s attractive. The other piece of it has been the conversations that we've had with different BOTs around the country because they recognized that they had initial. So one of the conversations that I had with the secretary of transportation of southern state went along the lines of, look, I’ve got a high class problem, I’ve got $2 billion worth of work that I need to get out and the governor wants me to get that out and the legislation wants me to be get that out, and by the way I want to get that out. And one of the ways that they are dealing with that and here is part of the change that we’ve seen, Scott, is they’re dealing more with third party architects and engineering firms. So to the extent that BOT have had issues hiring or re-staffing up they are using resources in a much more constructive fashion now than they ever have in the past. And the fact is that’s probably a pretty good model for them, because it lets them control their internal costs, it lets them put out a good specification product. But again I think what we will see and what we started to see in portions of Q4, we're starting to see those projects release and simply seeing those projects release I think is one reason that you’re seeing a better feel and a better tone from people in our business and our customers. I hope that helps.

And then for the quarter, looking at the margins, which were obviously strong I know optically strong price and declining volumes makes incrementals look inflated. But can you speak to any cost control or anything else that you may have achieved in the quarter that seem to drive that operational performance and is that something that we should see going into the future?

Well, I guess, there are couple of things that happened there. Did we have good pricing? We did. Did we have good cost control? We did. And did we put some more inventories in the ground anticipating a busy 2018? We did some of that too. I don’t want to completely overshadow the fine performance that the team did. But I would highlight there were some inventory builds out there. But the majority of it was the pricing and what we’re doing from an efficiency perspective, but it should have that one off. I mean, you had incrementals with 100 in front of it. And that’s not usual for Q4. But still, it was the performance that we are justifiably very proud of.

And one last one on cement, the guidance looks like at the midpoint, it’s quite year-on-year increasing gross profit. Just seem if you could parse out potential your different market and the drivers whether it’s the volumes and pricing, obviously you did a good job holding it and how you’re thinking about the cement business more granular in Texas? Thanks.

Keep in mind, we are the cement volume leader in Texas and we’ve got plants there, so one in Midlothian North Texas, one at Hunter just outside of San Antonio. I guess the couple of things, one we saw a good finish to 2017. We think that really set the stage for a positive 2018. Q4 volumes are positive in both north and South Texas and we have an expectation that we’ll see volume and pricing increases in 2018 as well. We think there continue to be very strong underlying economic conditions in that state. We think we’re going to see better DOT this year, I mean we’re seeing that DOT delta up from a 6 to last year up to 79 this year, so that’s $1.7 billion more just in that all by itself. We also have a new yard in New Caney outside Houston. We also have some material we’re going to be supplying a little bit in Western Texas, as well. And really that’s more focused just on the south end of it. We also think what we’re going to see in North Texas this year is going to be a very exciting, very full, very dynamic market. So as we’re looking at that marketplace with more volumes and we’re looking for some price increases there that they’re probably going to be around that $6 a ton range, probably a little bit better in the north than it is for the south. And you take those and put them together, we think it’s going to be a pretty attractive place. The other thing that I’ll bring your attention to is if you look at our share by quarter in 2017, we had 21.4% in Q1, 20.9% into 19.1% in Q3, that’s when we spoke last and 20.2% by year-end. And you started seeing this capture some of the share that we had lost in many respects, because we have been resilient on pricing. We think our strategy is working in that marketplace and we will continue to be very thoughtful about how we capture a bit more share than the overall Texas marketplace. But Scott helpfully that gives you a good drive by on what we see in Texas cement.

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

Ward, can you talk us about what you're seeing for your shale related shipments, how did the year end up, what's your anticipation of the ramp in '18 for that part of the business as you speak to your customers. And can you just calibrate us on a run rate basis, how diversified is this business is by shale play?

Happy to do that Jerry. And what I would say is the shale finished up nicely at the end of the year. I gave you some numbers. These are probably a bit surprisingly. Our volumes to shale in Q4 were up 43%. If we look to the full year, they were up 24%. We think that’s a positive outlook for 2018, particularly as we see the WTI state nicely above $50 on a per barrel price. Again, obviously, what we're seeing lately is around $61, we think that continues to drive people toward greater energy efficient or energy related jobs. Here’s what are those Jerry, if you go back overtime, what that means is in 2017 we sold almost 1.8 million tons to different shale plays. And when I say that, we sold some in Niobrara, we sold some in Marcellus, we sold some into Barnet, Eagle Ford, Avard and Haynesville for let’s call it total 1.8, which doesn’t sound bad until you go back overtime and say what does that look like in 2014 that was the peak. We sold almost 7.5 million tons to those same different plays in 2014. So 1.8 in '17 versus what was about 7.5 in 2014. And look do I think 7.5 is a normalized run rate, short answer is no. But do I think a normal shale demand should be in that three to four million ton range or 50% higher than we are today, I do think that’s probably a pretty realistic outlook for it. I'm not saying that’s going to be the outlook for this year, but I'm saying as we look at non-res numbers that should continue to grow for us. This is certainly going to be a piece of it and we're still at places that we feel like in shale are quite low, so I appreciate your question on that, because that is the big delta from where it was several years ago to where it was last year even though last year was better.

And Ward just the cadence so you mentioned you're exiting the year up 43% year-over-year in this business the comps should be equally easy through the first half of the year. So I know we're talking about the small numbers here. But is that the ramp that you expect based on what you're hearing from your customers similar through the first half of the year in that mid 40s exit rate?

I think you could certainly see that type of building, and I would expect more of that to start in Q2 simply because of the weather issue that are inherent in Q1. And keep in mind, if you're selling into our Marcellus or Niobrara, that’s a very different Q1 than is Eagle Ford, for example. So I think a lot of its going to depend on where. But I will say this from a percentage prospective the three areas that did get the most better in Q4 would have been Barnet at 38% up, Eagle Ford at 130% and Haynesville at 51% up. So that gives you a snapshot of at least where the action is and hopefully what the time we're looking feel like.

And then separately from a pricing standpoint, I know we’ve got moving piece in terms of which regions are driving growth for you folks in '18 versus '17. As you look across your markets, how do you expect the magnitude of price increases on January 1st and April 1st of this year and compare to what you saw last year and any differences in terms of parts of the footprint where you’re going earlier or later in construction season with your planned price increases this year.

You know what, it varies at lot Jerry. And I’d rather not go into very specific markets and talk about dollars and cents on any given market, but here what I’ll say. Clearly, there are some markets that will see increases and have seen increases on January 1st. There are others that will go as late as April 1st. So we’re not seeing things past April 1st. The one thing that’s work reflecting on and I mentioned early in the conversations some of the diesel costs. Diesel in a rising cost circumstance has clearly been something that has continued to at least pop-up in past what has been some with your price increases, we’ll have to see how the year shapes out on that and have to see what happens with diesel. But again from a pricing perspective, many in January some in March a few in April is the way that I would encourage you think about that, Jerry.

Thank you. Our next question comes from the line of Phil Ng with Jefferies. Your question please.

Based on your guidance it appears incremental margins for aggregate business is going to be little lower than that 60% historical run rate. Just curious how to that is mix in diesel. And do you expect that incremental margin profile to return back to 60% level in 2019?

I think the big issue there is going to be on the where. So if we go back to the guidance and really think about what’s in the guidance itself and how it rolls up, I mean if we’re looking at the low end of that guidance what the low end of that guidance would assume is that you’ve got flat Mid-Atlantic volumes and Southeast just up mid-single-digit versus our forecast of high mid-single-digits. So the short answer is if you’ve got Virginia and North Carolina and South Carolina going at greater rates than that, it’s clearly going to be a friend to the incremental margins. So it’s really going to be more of a story on the where. And one of the nice -- actually, the Secretary of Transportation here in North Carolina who I was referring to a little while ago, who is got the high class problem of having several billion dollars worth of work that he needs to get out the door. So we’re serving hoping that we see that. We have necessarily built a budget around that. But to give you a sense of it that’s really more your driver than anything else, because those are obviously our highest price, highest margin areas that we think have very bright futures. We’re a little bit cautious right now on exactly when that future shows up, but we like what we see.

And then public spending remains weak, here’s the budget delays we’ve seen had any impact in the fourth quarter, and you’re expecting remain an overhang in 1Q and any risk in terms of impact in the peak construction season this year?

I don’t see a big risk on the construction season this year. Again, I think it’s important to go back the answer I’ve given a little while ago relative to the cadence, because I do think historically people have tended to put more weight on a Q1 than Q1 really deserves. As I said really since last couple of weeks in March that at least in the 20 plus years that I’ve been around this industry tend to even make the quarter work or not, and I would just take to make a year back based on the last two weeks in March. I don’t see anything relative to state budgets or the federal budget that gives us any notable concern as we’re looking at. What we believe the construction season is going to look like when there is seasonal rise in earnest.

And just one last one for me, you seem pretty constructive on a potential infrastructure bill. But just curious if you have any better line of sight on the funding aspect. And it appears to be a bigger reliance on the state level side of things from the funding standpoint. And lastly, is it your view that $200 billion federal funding piece will be incremental to FAST Act? Thanks.

Its couple of things, I’ll start with your last question first. So I think everything that we’ve seen in the Trump infrastructure package is intended to be incremental. So there is not anything coming from what's already there to what’s going with this. I think several things are underway. I think the Trump proposal candidly starts the conversation relative to funding and financing. And I think that’s important thing to remember. I think we’re going to have to watch what comes out of congress relative to the funding piece in particular. So for example Chamber of Commerce is looking for $0.25 gas tax over five years, the American Trucking Association is looking for $0.20 over full year. And the reason that matters is you get $1.7 billion per penny so that’s clearly the easiest way to do that, and the quickest way to do it. The other thing that we need to keep in mind is there are host of different proposals that are still being discussed in congress. I think we're going to see this congress come forward with something that’s going to be in near term fix to really how we’re going to enhance infrastructure spending. But I think they are also going to want to address longer term what the pay force look like. That’s number one on what we see coming from this infrastructure act. The other piece that I think is really at the moment is what happens from a regulatory prospective, because that’s really going to be the place that you can see the game change pretty notably. Here is another anecdote for you. In talking to Secretary of Transportation again at the state level, I’ve been told that it’s not all unusual for getting projects to take 10 years to go through the…

Your next question comes from the line of Adam Thalhimer from Thompson Davis. Your question please.

With regards to the infrastructure up mid single-digits this year, Ward. Do you think that’s more back half weight or do you think that if that picks up along with the normal construction season in March?

What I think it probably picks up with the normal construction season in March. I mean, if we just go through and look broadly at those big eight, those lead eight states we spoke of before, I mean TXDOT has a letting plan 7.9 billion this year versus 6.2 billion last year. I think we feel positive in Georgia as we feel like the House Bill $170 will start to again have much more notable effect. And we’ve talked about the fact that North Carolina we believe has a positive outlook and we’re seeing an accelerating letting schedule here. I think if we look at South Carolina and we say, they’ve done something that really is not typical for South Carolina, they raised their gas tax over a six-year period. I think we’ll clearly start to see more work there, and Indiana has done the same thing. And Florida is at a near record budget at $10 billion. And part of what we’re liking in Colorado right now which has been just really strong robust pay force is we continue to see big jobs letting that state. And here’s part of the difference that we’re seeing there. These are big complication jobs that are going. So if we’re looking at two large TIFIA projects and C-470 is one of them that’s underway, and I-70 will start in 2018 and that’s $1.7 billion worth of total investment. And part of the trick on those jobs is we think aggregates will be tight in that marketplace, and we think contractors are appropriately going to be focused on making sure they have aggregate suppliers and partners going into those jobs to actually meet their needs. So again I think we’re going to see a normal rhythm and cadence to it. I do think we need to get past March 15th, because in many states under DOT specifications, you can’t even really go for more on those projects until then, which goes back Adam to the earlier comment that I have that often times as last two weeks in the first quarter oddly enough to make it or break it. So I think we see a fairly normal consistent rhythm and cadence to public work as we go into 2018.

And then just a quick follow-up, you talked about an elongated recovery in the U.S. I’m just curious if there are any metro areas when you think we’re more late cycle than early cycle?

I’ll tell you, I don’t see many in our footprint that feel that way. And as we look at a lot of non-residential forecasting that comes out, I think most of them would continue to concur on that. If we look at the South and the Southeast, those areas continue to have expectations pretty heavy growth. About the only places that we see any degree of contraction at least from third-party forecasters are really in markets where we’re not. So we’re seeing at least people forecast something that’s going to feel a little bit more like a pull back in portions of the North Eastern United States. But again, if we’re looking at those spaces that matter disproportionally to us, what I would suggest you is I don’t see anybody who feels like their peaky and they are about to go over that peak and we continue to see a lot of cities and among them places like Atlanta and Raleigh and Charlotte and others that we think are still pretty early in the cycle. And as you know from falling us for years, those are cities that tend to be disproportionately important to us.

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

Quick question, we’re talking about the elongated cycle and certainly you guys got some benefit from the tax planned. Does it change how you think about leverage over the near-term? And I asked that post Bluegrass and the dead deal you're at looking at mid to high two sorts of level, which is very reasonable I think where we are. But I would love to hear your thoughts whether additional M&A, buybacks where you’re heading that in terms of all that.

Its Jim, I will take the question. There is no change to our capital priorities. So the right deal we’ll move on that make sense, as has been the case for years. But as it relates your question around debt and its relative attract of this with the new tax law, it’s obviously less attractive than it used to be, but it’s still obviously more attractive than the equity issuances. So we really don’t change too much from that perspective either. The tax law change does obviously give us more cash flow going forward and a greater ability to A, either delivery or B, pursue more acquisitions or share buybacks at the right point. So it just gives us more free cash flow to work with but I would say foundationally there is no difference in our approach to the capital allocation.

And one housekeeping, on the cement pricing the $6. Is that -- are you assuming the midyear price increase in that or it’s a market not requiring that at this point.

We started talking last year about cement price increases. So we think we're pretty much set with that.

Thank you. Our next question comes from the line of Craig Bibb from CJS Securities. Your question please.

Going back to aggregates margins for a second, you invested in capacity during 2017. And it sounds like you were building inventory in the third quarter and sold that through in fourth quarter. And I guess is that right..

It’s some in third, but there’s some in four, yes.

And what is the -- how meaningful is that a benefit to gross margin in Q4?

I guess, let's go back to the five first and we can go back what the margin look like. So I guess what I would tell you, if we look at it from a platform matter, Craig, there are parts in the Mid West in particular where we wanted to make sure we had adequate inventories on the ground, because cracking up in that corner of the world is bit of a challenge. So that’s why you will go ahead and do that. But to your point, incremental is based on some of the inventory build or 100 plus percent -- I think probably would have been more in buy and maybe slightly ahead of our targets had we not done that. So you would have seen a very attractive incremental margin in Q4. The inventory just made it look phenomenally attractive, so just in the spirit of transparency.

And then which markets are construction labor constrained.

Well, I guess what I would say is this. I want to say unemployment in parts of Indianapolis is about 1.8% typically people would say 2% its full employment. So that’s pretty constrained right now. But here is the issue that we’re running into we're not constraint from our perspective. In some instances it’s contractors have been constrained in some markets, but the observation that I would make to you is this Craig. When contractors need to move on jobs either because they’re concerned about liquidated damages or they want to get an incentive bonus for finishing early, my observation is they are able to meet those deadlines when they need to. I think contractors the more we see talk and the more we see action on an enhanced infrastructure project, I think they can hire in these markets. So I think in many respects they have chosen not to higher in these markets. And I think as we come into 2018, they’re going to be able to meet what the demand is and probably start positioning themselves for what we’ve indicated we believe is going to be an extended cycle.

Are your issues with CSX solved?

CSX is working their way through what has been an extraordinary period of time. So, I clearly had a change in CEOs twice, one with Michael Ward’s retirement and then, sadly, with the death of Hunter Harrison. They clearly have had a change in their strategy. They went from really largely unit trains to more precision railroading, which means in their terminology, manifest service. I mean what that meant for portions of last year again in the spirit of transparency, they did have some longer cycle times. They did struggle at times with rail congestion. And I think on occasion they were resource limited. What I would tell you is we have had very constructive conversations with CSX. They have been good partners to us and continue to be good partners to us. And we’re seeing their performance improve over the last several months in terms of cycle times and fulfillment. So I am going to tell you that it’s perfect, exactly the way we would like to see it? No, I don’t think I can say that. Can I tell you that it’s considerably better, I can. And can I affirm to you that we expected to continue to get better through the year? Yes. And have we, in many respects, built those notions into what we put out as our guidance? Yes, we have as well.

And you’ve been talking for a little bit about, specifically North Carolina’s ability to actually get work let, the transition they’re undergoing. Are you seeing the work being let yet, or is it still two or three months out?

I think we’re seeing that improve circumstance in North Carolina and my expectation is based on some of the dialogue that we’ll continue to get better. We’re going to bring a little bit of show me to North Carolina, we’re going to -- or Missouri to North Carolina, we’re going to wait for a little bit more show on that. But right now, the outlook is good. North Carolina has a very good secretary of transportation and he’s a visionary thoughtful leader. And I think he will do great things with DOT in the state.

Well, congratulations on world-class safety and $1 billion in EBITDA on the same year.

Craig, we’ll take both of those. Actually, Craig, here’s the funny thing. If somebody had said to you last year, Hey, Martin Marietta is going to be down million tons year-over-year and they’re going to hit $1 billion, you probably wouldn’t taken that bet. I really have to give a shout out to our team they did a fantastic job and thank you for your comments.

Our final question comes from the line of Garik Shmois from Longbow Research. Your question please.

I just want to calibrate my modeling on incremental margins as we move through 2018. Ward, if I heard you right, with some of the inventory build in Q4 and assuming normal seasonality, is it fair to assume just Q1 incrementals will be potentially meaningfully although your full year guidance to then incremnetals as you move through, I mean the construction season is going to be above the full year guidance than maybe even looking closer to that traditional 60% range that you hit?

That’s certainly the right way to think about that. I mean, I would never expect in the normal circumstance with the normal January and February and early March to have the types of incrementals that we’ev talked about through a cycle across the enterprise. So the short answer is yes. I think you should typically expect to see a build on those through the year. In a normal time what I would tell you is you should typically expect to probably see them peak in late Q3 or early Q4. And part of what happened this year Garik is candidly, October showed up in November. I think the short answer is I think a lot of people were looking at a wet October, which is usually the busiest month of the year in the aggregates industry. And it wasn’t because the weather and then November ended up being a very strong November. So yes, the way you’re thinking about incremental is the right way.

And then just one question on cement. Are you seeing any trend of imports just bleeding your way from the Huston market to Central Texas or North Texas, would there be any potential impacts to your pricing guidance if that was the case?

We're not seeing anything notable that happened -- that's happening in that respect certainly, not in North Texas. Obviously, you’ve get some activity at the port in Huston and in South Texas. But again, the competitive issues that are underlying in that state have all been taken into account and the forecast that we put out here.

Thank you. And this does conclude the question and answer session of today's program. I'd like to hand the program back to Ward Nye, Chairman, President and CEO for any further remarks.

Thank you again for joining our fourth quarter and full year 2017 earnings conference call. Our team's disciplined execution of our strategic plan and demonstrated record performance continue to provide a firm foundation to enhancing long-term shareholder value and underscores our confidence in Martin Marietta long term outlook. We very much look forward to discussing our first quarter 2018 results in April. Until then, thank you for your time and your continued support of Martin Marietta.

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