Good morning, ladies and gentlemen. Welcome to Martin Marietta's third quarter 2020 earnings conference call. My name is Donna, and I'll be today's coordinator. All participants are currently 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 and will be available for replay on the company's website. I will now turn the call over to your host, Ms. Suzanne Osberg, Martin Marietta's Vice President of Investor Relations. Suzanne, you may begin.
Good morning, and thank you for joining Martin Marietta's Third Quarter 2020 earnings call. With me today are Ward Nye, Chairman and Chief Executive Officer, and Jim Nickolas, Senior Vice President and Chief Financial Officer. As a reminder, today's discussion may include forward-looking statements as defined by United States securities laws in connection with future events, future operating results, or financial performance. Like other businesses, Martin Marietta is subject to risks and uncertainties that could cause actual results to differ materially. Except as legally required, we undertake no obligation to publicly update or revise any forward-looking statements, whether resulting from new information, future developments, or otherwise. Please refer to the legal disclaimers contained in today's earnings release and other filings with the Securities and Exchange Commission, which are available on both our own and the SEC website.
We have made available during this webcast and on the investor relations section of our website, Q3 2020 supplemental information that summarizes our financial results and trends. In addition, any non-GAAP measures discussed today are defined and reconciled to the most directly comparable GAAP measure in our earnings release and SEC filings. Effective July one, in connection with us streamlining our operating structure, we also changed our reportable segments. Our building materials business now consists of the East Group, whose operations were previously reported in the Mid-America and Southeast Groups, and the West Group, which had no significant changes. In addition, the Magnesia Specialties business comprises our third reportable segment. Prior year results have been revised to conform with this new reporting structure. Today's earnings call will begin with Ward Nye, who will discuss our third quarter operating performance and market trends as we move toward 2021.
Jim Nickolas will then review our financial results and liquidity position, and then Ward will provide some closing comments. A question and answer session will follow our prepared remarks. I will now turn the call over to Ward.
Thank you, Suzanne, and thank you all for joining today's teleconference. We sincerely hope that you and your families are safe and healthy. Martin Marietta's strong business execution and commitment to operational excellence provide the foundation for our company to consistently deliver record financial, operational, and safety performance. As highlighted in today's release, we established new profitability and safety records for the first nine months of 2020. Year to date, gross profit increased to $927 million in adjusted earnings before interest, taxes, depreciation, and amortization, or adjusted EBITDA, surpassed the $1 billion mark. We have also achieved the best safety performance in Martin Marietta's history with a company-wide lost time and total recordable incident rates exceeding world-class levels. For the third quarter, increased pricing across all product lines and disciplined cost management helped mitigate anticipated shipment declines driven by the COVID-19 pandemic.
Third quarter financial highlights as compared with the prior year period included consolidated gross margin increased 100 basis points to a record 30.6%, despite a 7% reduction in revenues, demonstrating the resiliency of our business and our focus on cost control. Selling, general, and administrative or SG&A expenses as a percentage of total revenues improved 10 basis points to an industry-leading 5.4%. Adjusted EBITDA was $502 million, inclusive of $70 million of non-recurring gains, and diluted earnings per share was $4.71. For clarity, the non-recurring gains contributed $0.87 per diluted share. These results are a testament to our dedicated and talented employees who are managing through today's challenging public health and economic environment, as well as the proactive steps we have taken to adjust the company's cost profile. Now, for a review of our third quarter operating performance. Aggregate shipments declined nearly 9% versus a robust prior year comparison.
As anticipated, given the widespread COVID-19 disruptions across the U.S., shipment declines were experienced across our footprint, with the East Group down 9% and the West Group down 8%. Additionally, the East Group shipments were impacted by weather-delayed projects in the Carolinas, Georgia, and Florida, anticipated lower infrastructure shipments in portions of North Carolina, and reduced wind energy activity in Iowa. Wet weather in Texas and lower energy sector demand negatively impacted West Group shipments. In line with broader macroeconomic trends, aggregate shipments to both the infrastructure and non-residential markets declined. Shipments to the residential market improved modestly. Aggregates ASP increased 2.7%, or 4% on a mix-adjusted basis, underscoring this product line's resilient pricing power.
By region, the East Group posted a 4.4% pricing increase with strength in our key geographies of North Carolina, Georgia, Iowa, Indiana, and Maryland. The West Group average selling price declined slightly, reflecting a lower percentage of higher price shipments from distribution yards. We continue to see attractive pricing in both Texas and Colorado. On a mix-adjusted basis, the West Group average selling price improved nearly 4%. As a reminder, we anticipate overall full year 2020 aggregates pricing growth of 3%-4%. Underlying demand for our Texas-based cement business remains positive, supported by diversified customer backlogs and large project activity. Third quarter cement shipments, however, decreased 4%, reflecting continued energy sector headwinds. Reported cement pricing increased 1%, while average selling prices for our core cement products, namely Type I and Type II cement, were up $4 over the prior year period.
Lower shipments of oil well and lightweight specialty cements bound for West Texas disproportionately impacted overall pricing growth. As a reminder, specialty cements can sell for over $200 per ton. On a mix-adjusted basis, overall cement pricing increased 3.4%. Turning to our targeted downstream businesses. Ready-mix concrete shipments decreased 4%, excluding acquired shipments and third quarter 2019 shipments from our Southwest division's concrete business in Arkansas, Louisiana, and Eastern Texas, which we divested earlier this year. Texas construction activity was hindered by wet weather. By contrast, Colorado shipments benefited from favorable weather and continued activity on a large Amazon fulfillment center. Favorable geographic mix from robust Colorado shipments was the primary driver of the 2% increase in third quarter concrete pricing. Asphalt shipments for our Colorado asphalt and paving business decreased 3%, following near record levels in the prior year period.
Asphalt pricing increased 6%, reflecting a higher percentage of attractively priced specialty asphalt mix sales. For our Magnesia Specialties business, weakness in chemicals and lime demand began to moderate during the quarter as steel utilization rebounded from June's trough. We expect continued improvement through the balance of the year. Before discussing our preliminary 2021 outlook, I'll now turn the call over to Jim to conclude our third quarter discussion with a review of our financial results and liquidity. Jim?
Thank you, Ward, and good morning to all. For the third quarter, the building materials business delivered products and services revenues of $1.2 billion, a 6% decrease from the prior year period, and product gross profit of $384 million, a 3% decrease. Aggregates product gross margin expanded 130 basis points to 36.4%, an all-time record, despite lower shipment volumes. Strong mix adjusted pricing gains, disciplined cost management, and lower diesel fuel costs contributed to 6.5% growth in aggregates unit profitability. These results demonstrate the cost flexibility and resiliency of our aggregates-led business. Cement product gross margin was 40.2%, a 40 basis point decline. Despite lower revenues, the cement business benefited from lower fuel costs and prior year kiln investments that have improved reliability and throughput. For our downstream businesses, ready-mix concrete product gross margin declined 90 basis points to 9.7%, attributable to higher costs for raw materials.
Asphalt and Paving achieved record gross profit of $32 million and a 140 basis point improvement in margin despite lower revenues. Magnesia Specialties third quarter product revenues decreased 7% to $55 million, reflecting lower demand for chemicals and lime products. Lower revenues and reduced fixed cost absorption resulted in a 240 basis point decline in product gross margin to 28%. Our consolidated results included $70 million of gains on surplus non-core land sales and divested assets. These gains, which were recorded in other operating income net, are non-recurring and should not be extrapolated in a run rate calculation. As a reminder, surplus land sales were part of the value proposition of our TXI acquisition, and that's exactly what you're seeing this quarter. Since 2016, we have sold nearly $200 million of excess land that was not used for operations and did not contain operating assets.
While we cannot predict the timing of any future land sales, we expect additional non-core real estate divestitures as favorable opportunities develop. We achieved the highest adjusted EBITDA margin in Martin Marietta's history, both inclusive and exclusive of the previously discussed non-recurring gains. We anticipate adjusted EBITDA to range from $1.35 billion to $1.37 billion, inclusive of the $70 million of non-recurring gains for full year 2020. Now, turning to capital allocation and liquidity. We continue to balance our long-standing disciplined capital allocation priorities to responsibly grow our business while maintaining a healthy balance sheet and preserving financial flexibility to further enhance shareholder value. Our priorities remain focused on value-enhancing acquisitions, improving organic capital investment, and a consistent return of capital to shareholders while maintaining our investment-grade credit rating profile. In August, we acquired an aggregates and ready-mix concrete company in the Dallas-Fort Worth Metroplex.
These acquired operations complement our existing geographic footprint and expand our customer base. They also enhance our aggregate and cement throughput to drive incremental upstream value. We have widened our full-year capital expenditures guidance and now expect it to range from $350 million-$400 million. We are exploring additional like-kind exchange opportunities that would defer the taxes we would otherwise pay on this year's sizable land sales. Since our repurchase authorization announcement in February 2015, we have returned $1.8 billion to shareholders through a combination of share repurchases and meaningful, sustainable dividends. Our board of directors recently approved a 4% increase in our quarterly cash dividend paid in September, underscoring its continued confidence in our future performance and cash generation. Our annualized cash dividend rate is now $2.28. Share repurchase activity remained temporarily paused during the quarter. Repurchases can resume at management's discretion.
With a debt-to-EBITDA ratio of 2 times, we are at the lower end of our target leverage range of 2-2.5 times. We remain confident in our balance sheet strength with $1.2 billion of total liquidity. With our low leverage and ample liquidity, we retain the financial flexibility to continue to profitably grow our business. With that, I will turn the call back over to Ward for his market trends commentary and preliminary outlooks for 2021.
Thanks, Jim. We're confident that our favorable pricing dynamics will continue and that attractive underlying fundamentals and long-term secular growth trends across our key geographies will remain intact. To offer some specific color on how this is playing out, it's notable that both our upstream and downstream businesses have seen improvements in data shipment trends since July lows, with October average data shipments above prior year levels. While we're cautiously optimistic about these trends, we believe COVID-19 related uncertainty will likely persist through the winter and spring seasons. Keeping that in mind, we currently anticipate product demand will remain modest through the first half of 2021, and product pricing will remain strong. As the U.S. economy resets from COVID-19 disruptions, the longer-term macroeconomic indicators, such as underbuilt conditions, historically low interest rates, and hourly workforce availability, are favorable and should support a construction-led recovery.
We're seeing encouraging long-term trends across our three primary end-use markets and key geographies, including bipartisan support for robust multi-year federal surface transportation reauthorization, heavy industrial activity to support e-commerce and remote work needs, and single-family housing expansion driven by accelerated de-urbanization. We believe these trends bode well for a more aggregates-intensive construction cycle than experienced during the slow but steady recovery from the Great Recession. Infrastructure activity, particularly for aggregates-intensive highways, roads, and streets, continues to be resilient. With gas tax and sales revenue shortfalls less than originally anticipated, state departments of transportation or DOT budgets are in better condition than expected at the pandemic's onset. For example, Texas DOT scheduled lettings for fiscal year 2021, which began September first, are currently planned at $10 billion, an increase of 35% over the comparable fiscal year 2020 lettings.
Updated Colorado DOT projections indicate relatively flat transportation spending levels for 2021, and North Carolina DOT, which temporarily suspended awards for certain projects in response to pre-COVID-19 funding issues and other factors, recently revised its letting schedule upward and resumed bidding for resurfacing work earlier this month. As a reminder, these three key states represent over 60% of our building materials business revenues. On the federal front, the President recently signed into law a continuing resolution that included a one-year extension of the Fixing America's Surface Transportation Act, or FAST Act, at current funding levels, which was consistent with our expectations. In our view, this provides state and local governments the visibility needed to plan, design, and let transportation projects through the 2021 construction season.
Over the medium to long-term future, we expect the industry to benefit from the passage of a reauthorized comprehensive federal surface transportation package, which we anticipate will be enacted by mid-2021. Both the United States House and Senate have advanced federal highway legislation underscoring bipartisan support to remedy the nation's crumbling surface transportation infrastructure. Notably, both bills provide the first sizable increase in federal transportation funding in more than 15 years. Regardless of the upcoming election outcomes, increased infrastructure investment should provide volume stability and drive aggregate shipments closer to 45% of our total shipments, moving us toward our 10-year historical average. For reference, aggregate shipments to the infrastructure market accounted for 28% of third quarter shipments. Although certain sectors of non-residential construction remain challenged in the near term, COVID-19 is driving a paradigm shift that should promote more diverse non-residential demand than the previous cycle, fueling long-term aggregates growth.
Accelerating technology, e-commerce, and remote work trends require increased investment in heavy industrial warehouses and data centers, which are generally more aggregates intensive than light commercial construction due to the size and scale of these projects. Importantly, we have purposefully shifted our non-residential exposure over the last 10 years or so to be more heavily industrially focused as we've expanded our geographic footprint along major commerce corridors. Additionally, light commercial construction, despite its current weak demand, should benefit in the longer term from the drag along effects of strong single-family residential trends. Aggregate shipments to the non-residential market accounted for 33% of third quarter shipments. Single-family housing is expected to lead this economic recovery as de-urbanization accelerates. Prospective home buyers are increasingly moving from large metropolitan cities to smaller metro or suburban areas amid the pandemic.
Recently, North Carolina, our third largest state by revenues, was identified as a top migration destination, ranking number 7 among states that experienced the most inbound moves from March through August of this year, according to data from United Van Lines. These trends extend beyond those moving from one state to another. They also include existing residents opting to move farther out from city centers. Across our southeastern and southwestern footprint, underbuilt conditions and favorable population and unemployment dynamics provide Martin Marietta with a distinct competitive advantage for outsized secular growth in single-family housing development. Importantly, single-family housing is two to three times the aggregates intensity of multi-family housing, given the ancillary, non-residential, and infrastructure needs of new suburban communities. Aggregate shipments to the residential market accounted for 24% of third quarter shipments.
In summary, as our third quarter and year to date results demonstrate, navigating challenging times and emerging from them stronger are hallmarks of our company. We've executed with a thoughtful strategy and taken deliberate steps to position Martin Marietta as a resilient, efficient, and cash flow generative business that can consistently drive shareholder value creation. We will continue to do what we do best: manage our business safely and responsibly, ensuring that we're prepared to seize profitable growth opportunities for the benefit of our stakeholders. Martin Marietta remains well-positioned to capitalize on the emerging growth trends that are expected to support steady and sustainable construction activity over the long term. With our attractive underlying fundamentals, strategic priorities, and best in class teams, we're excited about our bright prospects for driving long-term sustainable growth and shareholder value in the fourth quarter, in 2021, and well into the future.
If the operator will now provide the required instructions, we'll turn our attention to addressing your questions.
Thank you. To ask a question, you will need to press star one on your telephone. To withdraw your question, press the pound key. We ask that you please limit yourself to one question and a quick follow-up to allow time for everyone to queue. Please stand by while we compile the Q&A roster. Our first question comes from Trey Grooms with Stephens. Your line is now open.
Trey, good morning. Are you there?
Oh, sorry. I was on mute. Sorry about that.
You're probably having a grand conversation.
Oh, yeah. Sorry about that. Well, thanks for taking my question, and thanks for the color. Really, I want to dive in first on the aggregates margins. Very strong, especially given the lower volume. Also one of your highest priced, highest market state, North Carolina, is pretty challenged. Pretty strong there. What could you update us on maybe some of the cost tailwinds that you're seeing in the aggregates business? Clearly diesel, but it seems like there's much more at work here. How do you think about the sustainability?
Trey, thanks for the question. No, you're entirely right. To put up these numbers when, as you said, North Carolina is not at the peak of its game right now. We think it's going to be back to normal, by the way, half year next year. What we've done in this very impressive quarter is done it with about an arm and a half tied behind our back because North Carolina is down, but it's not going to stay down. Magnesia Specialties is going through a difficult moment right now, but it's not going to stay down either. What you're seeing is really a twofold impact, Trey. One, pricing was very good, and that's something that we've come to expect and you've come to expect, as have our shareholders. There are no surprises there.
It's nice to see it performing in a resilient fashion again when you're closed down to double digits on volume. To your point, I think what we're really seeing, even separate and distinct from the energy piece of it, is very good cost performance. That's something that our team has been focused on. It's nothing that's new to Martin Marietta. You can see it also in the SG&A numbers. If I go through and look at where were we, not just in energy, but where were we relative to contract services, repairs, supplies, and other plant costs, all down. That's exactly what we would anticipate. As you recall, Trey, as we've gone through cycles, we tend to invest very carefully in our company. When we were going through the financial crisis and the Great Recession, we did pull back on CapEx.
At the same time, the last few years, we've taken CapEx up, and that has truly been an investment in our business. What we're seeing the benefits of is a better cost profile, operational excellence, cost performance across the spectrum that we would anticipate. The other thing that's important, Trey, is the way that we've grown our business. When we've added businesses, as we have in Colorado, and what we've done in Texas with TXI, and what you're seeing from excess real estate sales, and similarly, what we've done with Bluegrass. These have all been enhancing this organization that is truly aggregates-led, and you're seeing good performance come through on the cost side, which again, is exactly what we would have expected.
The thing that I've really enjoyed, and I'm so grateful for this team on, is continuing to show their agility in being able to manage that on the fly and as they would need. We're always going to remember 2020 as the year that could've been. If you're seeing this type of performance with volumes down, you can imagine what I believe we'd be doing this year if we were not in the midst of a pandemic.
All right. Thanks, Ward. That's encouraging and helpful. My follow-up, product demand, I think you mentioned in your prepared remarks, you're expecting to be modest through the first half of 2021, and pricing will remain strong. Could you go into any more color there for next year? Maybe a high-level look at the end markets. Does this imply a return to volume growth in the back half or an acceleration? What's your messaging there?
Trey, that's another great question. I would say several things. I would think in the back half, it should certainly be pointing toward volume growth. Here we are in Q3, which is the single largest quarter for the industry. It's the largest quarter for Martin Marietta, and we're down 9%. I would expect in half two next year, we are seeing growth. Keep in mind, quarter one is really a rather inconsequential quarter. There's very little volume that goes in Q1. The season really begins in earnest for a business like ours in May because that's when you'll have everything open across an enterprise, including those parts of the country that tend to be more weather affected. Would I say on a comparative basis, Q1 would be a tough compare? Yeah, but it's not going to be huge tonnage.
As a practical matter, the pandemic really started settling in as we went into Q2. I would think when we get to the back half of next year, we should start to see the economy grow in some ways. I do think that the urbanization trends that we're seeing will help us nicely on housing. I think Martin Marietta is going to be a very nice beneficiary of that because you saw the data that I revealed even on North Carolina relative to United Van Lines data. That same data is true for Georgia, and it's true for Florida, and it's true for Texas, and it's true for Colorado. Again, when we start going through those impact states, it matters. I think that's something that's real, and we're going to watch as we go into 2021.
The other thing that I would say relative to 2021, Trey, is infrastructure looks a lot better today than we thought infrastructure was going to look when we were at half year. If we look back at even where TxDOT said they were going to be at half year as they were thinking about 2021, they were at $7.5 billion. They've got a 10 handle in front of that today. We're looking in a state like Colorado, they're saying it's going to be relatively flat, and we know our third largest state by revenue in North Carolina is going to be better when we get into the second half of the calendar year of 2021. Remember, these states work on fiscal years that in large part end on June 30.
I think the end use that's going to be the one that we'll need to watch most carefully is not a surprise to anyone. It's going to be non-residential. I think you're going to have a tale of two different stories in non-res. I think the heavy side of it, Trey, is going to be pretty good. I'll give you a sense of it. In the greater San Antonio area, all by itself right now, we're bidding on, wait for it, six different Amazon fulfillment centers just in that marketplace. As we're looking at heavy side non-res in states where we have very intentionally built our business, we think that's going to look attractive. Whether it's data warehousing, or otherwise, we think that's going to be good. I do think hospitality is going to be challenged for a while.
I think varying degrees of energy on a comparative basis are going to be challenged for a little while, and I think office and retail will as well. Here's what I would say. If the housing trends continue the way that we believe that they will, and we believe it's going to be more single-family driven, we're going to see home builders buying more land, we're going to see them entitling that land, and we're going to see the drag along effect, probably not in 2021, but probably more going into 2022 of the light portion of non-res. What I've tried to do, Trey, in response to your question, is go through those three primary end uses that we have and speak to at least what we're seeing relative to trends right now.
Obviously, when we come out with our full year results in February and give the more percentage guidance, we'll give much more granularity to that. Again, my commentary is saying that this October compared to last October looks pretty good. We like that as a data point.
Absolutely. Thanks for taking my questions. I do want to say one last thing, though. I think this goes overlooked sometimes by the analysts and investor community, but I did want to call out the safety record that you guys have achieved. Blasting rock and working around heavy equipment can be a dangerous business, so hats off to you on that achievement.
Trey, thank you very much. It means a lot to us.
All right, take care.
Our next question comes from Kathryn Thompson with Thompson Research.
Hi. Thank you for taking my questions today. First focusing on the cement segment. Could you give more color on the backlogs for this segment, particularly as we look over the next 12 months? What does this mean for a pricing environment, given it was, needless to say, an unusual year this year for pricing? Thank you.
No, look, you're right. It's been an unusual year, but at the same time, what I'd say, Kathryn, is pricing, if we're really looking same on same, it's up 3.4%. Pricing in cement in Texas is behaving like aggregates. Keep in mind, that's something that we've long said we thought would be the case. If we look at our cement backlogs, I'll tell you that's one of the great stories, because we're seeing cement backlogs up 24% on strong infrastructure bookings and primarily a large job that Tesla has going on in the Austin area. It's a property that we sold them. The backlog situation looks quite good there. Actually, the pricing was pretty good, Kathryn. If you look at it, the optics of pricing and the reality of them are two very different things.
The reality is, energy sector sales for us, which are not a big amount of tons, were down 74% in West Texas. A big percentage, but small tons. The reason that's so important, and we called it out in the prepared comments, that's where that cement sells for over $200 a ton. If we're coming back and just looking at Type I and Type II cement in San Antonio and in Dallas, those numbers are actually up very nicely, and we think that that's likely what we're going to see next year as well. Now, in fairness, we have said that we're going to take cement pricing up in April of next year, and we have a letter out to that effect right now, and we're talking about $9 in that Texas marketplace next year.
I think that gives you a sense of how pricing has behaved this year, what has been the mixed effect on it, what does Type I and Type II look like? The other thing that I'll note, Kathryn, because this is important, too, is we have continued to see efficiency improvement quarter-over-quarter, year-over-year in our cement business. Part of what I would call out for you is volume is down, but the cement EBITDA in Q3, the margin of 46.2%, represents actually a new quarterly record. We're getting it both ways. We're doing it the hard way on cost, but we're doing it the other way on pricing as well. Again, backlog's up 24% or a little bit over 270,000 tons.
Okay, perfect. The follow-up question is more on the infrastructure side, and particularly with state DOTs. You have confirmed that, and our work also shows that the worst appears to be behind for North Carolina. Could you just kind of confirm what gives you optimism for that? Also looking at other key states like Georgia, who is still continuing to move along, and Texas and other key markets that are important for you from an infrastructure standpoint, particularly against the backdrop of how they are looking into next year. Thank you.
Sure. Happy to. A couple of things. One, Texas, I'll just go through them in order of revenue. Texas has huge FY 2021 lettings of $10.2 billion. We spoke about that just a minute ago. That's going to have a multi-year benefit to Martin Marietta. Our backlogs in that state are up in all three product lines, and we see some very large projects coming in 2021. What's important to remember is Prop 7 funding is currently projected at a full $2.5 billion. Even as we're looking at Prop 1, that's looking at $620 million. Keep in mind, none of that anticipates Texas having to tap into their $10 billion rainy day fund. Again, TxDOT feels very healthy, even compared to where we were at half year. Colorado looks pretty flattish, and that's what we're expecting.
We see construction activity there that's being supported by about a $1.8 billion four-year bond program. Two years remain on that. That could provide an additional $1 billion or more. We're feeling good about where that state is. Again, a nice improvement over where it was at half-year. The North Carolina DOT situation that you called out very specifically and appropriately is improving, and part of what we've seen even in the last week is North Carolina now is sending out some AA-rated bonds. They were just rated last week. It's going to be $700 million of Build NC Bonds. Importantly, the state has started or restarted lettings and anticipates about $1.3 billion of FY 2021 lettings. That's pretty similar to the pre-pandemic numbers of about $1.4 billion.
Again, we're feeling much better about North Carolina, and that's one that we obviously stay very close to. Similarly, you asked about Georgia, and we're anticipating there relatively flat DOT spending at about $2 billion. Part of what we think is important is it appears that Georgia is going to advance at least two of the major mobility projects in Atlanta. They're not going to have a 2021 start, but they're likely to have a 2022 start. Remember, these are major mobility projects at about $12 billion, and their primary aim is to reduce congestion along key corridors in Georgia. The last one, at least in our top five, is Florida DOT.
Again, we're looking at something there that we think is going to be very steady year-over-year. Keep in mind, they've got a very healthy P3 program in that state, so you've got a lot of toll activity in Florida. Again, if we look at our top five states, and that's exactly what I've just taken you through from an infrastructure perspective, year-over-year, we like the looks of that.
Great. Thank you very much.
Thank you, Kathryn.
Our next question comes from Paul Roger with Exane. Your line is open.
Hey. Good morning, guys. Yeah, it's Paul Roger. Can you just say a bit, obviously, it's a big week next week with the election? Can you just speak a bit about the potential implications of the different outcomes? Also, if there is a new highways bill or maybe some stimulus as well, when you think that would impact demand on the ground? Is it likely to be a 2022 story?
Paul, thanks for the question. It's good to hear your voice. Yes, I would say that we're one of the few industries that probably can't lose next week, and here's what I mean by that. If the President is reelected, we anticipate there's going to be a new highway bill, and we think it's probably going to be up very similar to the Senate's number. That's 28% over FAST Act, and that'd be the largest increase all by itself in 15 years. Similarly, if we should have a change in party in the White House and Mr. Biden is elected, the fact is, the Democratic-controlled House is looking at a 41% increase in highway spending. Here's what I would say. If the President's reelected, it's going up, and it's going up with less regulation. If Mr. Biden is elected, it's going up with probably more regulation.
The irony in that is, we actually do pretty well with regulation, Paul. We've got great teams. They're very sophisticated. They can deal with that very efficiently. I believe either way, Martin Marietta will be well-positioned. If there's more regulation, one of the things that we've certainly seen that drive in the past is perhaps more M&A opportunity as well. Because oftentimes, if you're looking at a higher tax, higher regulatory environment, closely held family businesses start reconsidering what their long-term future is as well. As we sit here and anticipate what different outcomes could be, it can change the way that we're going to think about some things around the margin. In large measure, we think under either one of those scenarios, Martin Marietta does very well.
That's very clear. It was interesting in your opening remarks, you inferred that this would have obviously been a fantastic year were it not for COVID. If you see a situation where we do get some volume growth again in 2021, are you basically suggesting there's a lot further you can go on the margins? I guess particularly if some of the more profitable markets, like the Carolinas, stabilize or grow?
Well, I would say a couple of things. One, volume will always be this industry's friend because you're going to have a certain degree of cost. As much as we like to be able to flex costs as much as we can, some of them are going to be fixed. It's a big, heavy industry. I think we control costs extraordinarily well. Again, I think geography from a mix perspective, actually this quarter, was not particularly our friend. If we see these Eastern markets behaving in a more robust fashion and volume hits those markets, it could be pretty impressive relative to margin. Keep in mind, in the East this year, we saw significant project delays and we saw extremely wet weather in what was formerly the Mid-Atlantic division.
Again, we've discussed the fact that we saw lower NCDOT funding that's going to be remedied, and we saw less wind farm activity. If we look at what didn't happen in the East and things that we don't think will continue to recur into the future, we think that's probably very attractive for our margins. The other thing that I would say is I would not expect the costs that we have been very good at controlling this year to go backwards on us. I think the investments that we have made on capital will be our friend. In fairness, there is a piece of that that's tied up in energy, and there are a lot of things we can control. I wish I could tell you that we could control overall energy prices, but we can't.
At the same time, as energy has tended to move upward, keep in mind that's also served historically as a mechanism for us to make sure that we can cover that with increased average selling prices as well. I do think relative to margins, geography is likely to be more of a friend than not going forward, and I think this is the type of cost performance that you should expect us to continue to deliver.
Yeah. That's very encouraging. Thank you very much.
Thank you.
Our next question comes from Jerry Revich with Goldman Sachs.
Yes, hi, good morning, everyone.
Jerry, good morning.
Ward, in your opening remarks, you were optimistic about pricing into 2021, which is really interesting considering pricing typically follows volumes, and obviously we're looking at a pretty tough back half of this year and first half of 2021. Can you just expand on those comments? What's enabling you to achieve this strong pricing, and what have you announced to customers for 2021, if I got the gist of your opening remarks right?
No, you did, Jerry. I guess what I would say is that I'm not sure that there was anything strikingly new about the observations I was making on 2021. I think the primary thing that I just want to underscore is that pricing is something that we tend to do really well in Martin Marietta. When volumes go up, pricing goes up. When volumes go down, pricing still goes up. This quarter I thought was a pretty good one because there are not a lot of industries that could come forward with volume down nine and pricing up the way that we saw pricing up this year. I think that's the underlying theme that I want to make sure that I underscore.
I think the other thing to remember, Jerry, is we're seeing that, as we pointed out in some of the conversations we've had. With that, one of our higher priced, higher profitable businesses, not at the top of their game this year because of what's not coming out of NCDOT. Again, I think we'll continue to see good price trajectory in large part because we're in really good locations. I think as we continue to see single-family housing go up, that's actually an area that we tend to do quite well in housing on, because if you're thinking about people who will at least try to utilize some form of volume on occasion as a lever to talk to you about pricing, that's typically not the home builder, because at the end of the day, there's so many things they care deeply about in the home.
The newsflash is the price of crushed stone usually is not one of them. I think if we end up seeing a new highway bill, we see the volume that we think will come from that, probably not in 2021, but as a practical matter, coming in 2022. We see a very healthy residential market, and then we see the drag along in the fullness of time of the light non-res. I think all of that portends very well for pricing. Again, if we look at those top five states that are disproportionately important to us, and you look at even what's happened with cement pricing in Texas, I think that tells you that the overall marketplace is in a pretty healthy spot.
Normally in this type of volume environment, I would have thought aggregate pricing should be up in the 2% range. It sounds like, based on your comments, that what you're announcing to customers is more like the pricing we saw in 2020 than what I'm describing.
Again, we'll give you even more granularity around that when we come out in February, because some of those conversations are still ongoing. Again, I think you get the overall sense that there's nothing in our pricing model that we feel like has been shaken by this strange time that we're all navigating together.
Okay. I appreciate the discussion. Thanks.
Thank you, Jerry.
Our next question comes from Anthony Pettinari with Citi. Your line is now open.
Good morning. Ward, on the decision to reestablish full year guidance, is it fair to say you were surprised by the resilience you saw in your end markets or maybe some of those cost factors that boosted margins? Was it just more of a function of having one quarter left in the year? I'm just wondering if you could kind of walk us through the decision-making process and what you saw specifically that made you comfortable with reestablishing the guide.
Yeah, Anthony, thank you for the question. I think part of it is you get deep enough into something that's strange, and you start to figure it out a little bit. I think candidly, that's part of it. The other part of it is, Anthony, there's just not that much runway left this year, and we've got a pretty good sense of how October is looking. Obviously, Q4 itself can have some swing factors to it. Obviously one of them is when does winter really set in earnest? It's been interesting, Anthony, because there have been years that we have been paving almost up to Christmas in Colorado, and equally, there have been years that well before Thanksgiving, it was shut down. Obviously we've tried to bracket what we think Q4 can look like from just a volume perspective.
We know what it's going to look like from a pricing perspective, and we believe we've got a pretty good handle on what it's going to look like from a cost perspective as well. I think those were the factors, candidly, that went into it. Again, the conversation that I was having just a few minutes ago with Jerry and others on end uses. We're trying to give as realistic a look into 2021 as we can. Again, we feel pretty good about all of it.
Okay. That is very helpful. Then you talked about some of the project delays that you saw earlier in the year. I am just wondering from a big picture perspective, the pace of project delays or cancellations that you saw over the course of the quarter, did that pace, was it fairly stable, or did it ease? Maybe you saw some more projects come back than you expected, or any kind of general thoughts there?
Yeah, I would say several things. One, we see deferrals, we don't see cancellations. I think that's an important bifurcation to draw because pushing projects to the right is an entirely different animal than calling them off. During the financial crisis and the Great Recession, we saw projects canceled. That's not what we're seeing. I want to call that. The other is, in some instances, we simply saw weather deferrals. Obviously, we've had some hurricanes that have come in through the Southwest this year, and we've had a good bit of rain in the Southeast. The primary place that, again, I think we're taking some degree of comfort is when we're seeing North Carolina DOT start reletting some surface transportation again, in some respects, for the first time in almost a year.
When we see that state beginning to return to something that feels more like in a patient, a normal sinus rhythm, that certainly feels better to us. We did not see anything relative to deferrals in the quarter that we thought were extraordinary or surprised us. In many respects, what I would say is from a volume perspective, I don't think we were very surprised this quarter. I think from a pricing perspective, we were not surprised. I'm not going to tell you that from a cost perspective, we were surprised. I will tell you gratified is probably the right word. Again, we expect to see more of that going into the future, not less of it.
Okay. That's very helpful. I'll turn it over.
Thanks, Anthony.
Our next question comes from Stanley Elliott with Stifel. Your line is now open.
Hey, good morning, everybody. Thank you for taking the question. Ward, when you're talking about or talking to your residential contractors, are you getting a sense that they're actually looking to buy land now and build out new subdivisions or that they're busy enough just keeping pace with what they are. I'm curious in the context that we've heard about a lot of delays for higher lumber prices and things like that. Any thoughts to what extent that could be a governor on the residential recovery into next year?
Stanley, that's a great question. What I think is this, one, they're busy, and busy usually begets busy. Number two, I do think the shift that we're seeing in the Great American move, moving more away from multi-family, moving to single family where people frankly want some space that they haven't had for the last several years, is going to lead to the necessity of buying more land. By the way, we don't think that's a bad thing. We actually think that's a good thing. Because if we look at the markets in which we are operating, one, they tend to have land. Two, the entitlement for new subdivisions isn't something that's highly difficult to do. Three, the ability to borrow money is there. We feel like all of that's important.
The other piece of it, Stanley, that we think is important is these markets are not overbuilt, and that's such a fundamentally different place. Part of what we spoke about in the half year call is we've seen single family move around over the last couple of decades. Single family recovery, as we're really looking at coming out of the financial crisis, fell to about 70% of starts versus what had typically been closer to 80%. If we're seeing it move back to more of a normalized portion of what we would expect single family to be, particularly as we're looking at these de-urbanization trends, and as we're looking at states in which we have a significant presence, Texas, Colorado, North Carolina, Georgia, Florida.
Those are going to be cities and those are going to be states that will be growing out, not states that will be growing up. Places that are growing out tend to be more aggregates intensive. Yes, I think home builders are busy. Yes, I think they will have to buy more land. I think they will be in the entitlement business. I think in the areas where we are, the entitlements will not end up being significant, to use your word, I think it's a good one, a governor on what housing growth is going to look like.
Great. Switching gears, thinking about the leverage range that you guys have talked about operating in the past. I mean, you're kind of there right now. Barring any sort of thing on the CapEx side, it should be another good year of cash flow. Are you more comfortable given the uncertain environment to let the cash build? Is there some things on the M&A front that seem intriguing right now? Just curious how you're thinking about the capital deployment into next year.
Stanley, that's a great question. You're right. We're at the low end of our range. Our debt to EBITDA ratio is at 2 times today. You've seen that steadily come down, and I'm proud of the way that we pulled that down. As you know, our capital priorities have not changed. Our capital priorities are to find the right acquisition. We think there may be some opportunities in 2021 that we're certainly looking at. The deal pipeline has become more active here over the last few months, and that does not surprise us. Equally, the other thing that we're waiting to watch, and everybody else in this call is too, what happens in the election? It'll be odd.
For example, if we do see a wider blue streak go through the United States and we see a higher regulatory regime come in, as I indicated earlier, we have certainly seen that as something that can serve as a bit of a catalyst for M&A activity as well. I think we want to make sure that we keep ourselves in a very flexible spot. Obviously, it's in management's discretion whether we go and turn back on the repurchases. We will certainly look at that and think through it carefully. You did see us, as Jim commented in his opening comments, we raised our dividend in September, so our September shareholders have already benefited from that.
I like where we sit from a balance sheet perspective, but equally, Stanley, and I think this is important as we think about M&A, I like where we sit from a regulatory perspective as well. The areas of the country where we would be most interested in growing, particularly if we're looking to establish new footprints, we've got a lot of white space and we have a lot of regulatory ability from a Hart-Scott-Rodino perspective. I think our teams have proven that they are very good at, one, identifying transactions, number two, going through the process of memorializing it, and then upon closing, pulling the synergies out of it as well. We're going to find good uses for that cash, whether it's investing in Martin Marietta, returning it to shareholders, or finding the right deal. You know how we rank those in order, Stanley.
Perfect. Thanks so much for your time. Good luck.
Thank you. Thanks, Stanley.
Our next question comes from Garik Shmois with Loop Capital. Your line is open.
Hi, thanks for taking my question. On non-residential construction, is there any way to quantify how much of the non-res volume split is between the heavy industrial piece versus the retail and office, just given the shift you've made more towards the heavy non-res side over the last several years?
Absolutely, Stanley. Stanley, as you'll recall, historically, non-res would have been around 30% of our business. Over the last several quarters, you've seen it actually considerably more than that. It's closer to the mid-30s. You'll recall historically, this was really, when I give you this background, this is pre-TXI. This is pre-River for the Rockies. This is pre-Bluegrass. We would've said it's almost a 50/50 break between light on one hand and heavy on the other. As we've done these large transactions, as we've come out of the River, as we have focused our business increasingly on these large commerce corridors. We feel like now the heavy side of it is probably at least 60%. It's probably moved that much just as we've done these transactions.
It's interesting to go back and revisit that number I gave just a few minutes ago, even talking about the fact that in the San Antonio area right now, we're bidding on seven Amazon warehouses, data center projects at various stages of bidding. The locations where we've been, whether it's on the I-25 corridor, whether it's on the I-35 corridor, whether it's on the 85 corridor or the 95 corridor, has really helped move that. If you think about those corridors, 95 was significantly changed by Bluegrass. 85 was significantly changed by what we did with the assets that we acquired in Atlanta. 35 was significantly changed by what we did with TXI, and 25 was completely remade with what we did in the River for the Rockies swap. The percentage shift is probably 60/40 today.
Again, non-res has moved to a bigger piece of the pie, in large measure because infrastructure has underperformed as we've gone through a series of reauthorizations that, unlike next year, has not gone up in value over the last 15 years.
Okay. Thanks for that. Just wanted to follow up on the guidance that you provided for the year. I don't want to focus too much on 4Q because it's a seasonally slower part of the year, but just given the color you provided on the October growth, what do you think is driving the increase? Is it project timing catch up from maybe some of the weather headwinds that you saw in 3Q? Maybe just more broadly, how to calibrate the different ends of the guidance range?
Yeah. I think several things, probably. One, we don't have some things going on this year that we had going on last year. There were actually varying degrees of headwinds last year. If you go back to it, Garik, part of what you'll see is we did have some increased grading last year. We're stripping at the quarries. We did accelerate some maintenance at our Hunter cement plant. Granite Canyon Quarry, which sits in southern Wyoming, which feeds that very vibrant northern Colorado market, was later coming on last year than we would've hoped. Then Hurricane Dorian sat over Freeport, Bahamas last year a little bit longer than we would've wished. Number one, that actually put some headwinds in Q4 last year, and we're thinking we're probably past some of that this year. Equally, I think the October trends are nice.
I think part of what we're seeing is some of the work, particularly in Central Texas, as Tesla is building their Gigafactory on that property that we sold them. That certainly adds some benefits. Again, if we see something that feels like a normal winter cadence, we're very comfortable with what we feel like would be the midpoint of that range. If that at least gives you a sense of what the puts and takes would be in the little bit of the year that's left. I hope that's helpful.
It is. Thanks to you. Thanks very much.
You're welcome, Garik.
Our next question comes from Phil Ng with Jefferies.
Hey, Ward. Good morning, and congrats on a strong quarter.
Thank you, Phil.
If we think of some of the policy optionality going into next year, if we get a stimulus package, this is separate from a longer-term authorization bill.
Yeah.
Do you see that impact coming through a little quicker on the demand side where the lag is shorter because maybe states can dial up lettings mid-year and see a benefit in 2021?
Yes
it's like a year plus lag. Okay.
No. I think they can, because part of what's happened, Phil, if we go back over time, several things. If you look at the way different states came out of the financial crisis, some states ended up hiring more people in DOTs. Texas is a good example. Some states started doing more outsourcing. North Carolina is a good example, which means at least as we're sitting here today, they have more projects that are engineered, they're designed, right of way has been purchased, and they're in a position if they want to go that they can. I think that's a very fundamentally different place.
To your point, if there's a phase four or if there's anything else, there's simply, as you know, AASHTO has long been advocating for about $37 billion that they feel like should go directly to states to help fill the hole that was created because gas tax revenues weren't there. Keep in mind, early in the year, they said that hole was going to be $50 billion. That hole got a lot narrower or not as deep over time. To your point, if that money went directly to NCDOT, do they have plenty of uses for it today? Absolutely. It's why they're floating $400 million worth of bonds. Could Texas do the same thing? To be sure. Could Colorado do the same thing? Absolutely.
Again, if you look at that state, they're metering out their bonding activity over time, and that could simply come in and help augment that. I do think your point's a good one because most of what we've been discussing to date has been around the reauthorized bill and what the timing would look like on that. Again, we're saying passage in 2021, but the real event from a tonnage is probably 2022. I do think if you got some near-term stimulus, that could actually be a 2021 event.
Got it. That's super helpful, Ward. I think the margins in the quarter are certainly really impressive in light of weaker volumes. When we think out to 2021, assuming you have a little inflation, not deflation like you've seen this year on energy, and you get some pricing and lower volumes. Do you have enough levers there to drive unit economics higher or at least keep it flat? Any color on the gross margin side as well?
Look, we'll obviously give you some really good guidance on that in February. I think part of what we're trying to outline, Phil, is this was a really impressive quarter, with volumes down almost double digits and our most profitable business with its arm tied behind its back. Again, our backlogs, for example, in Texas look very good. I think we can feel good about where that business is heading into 2021. Obviously, NCDOT is letting some jobs. I think we've been increasingly good about that. If the eastern business gets some momentum going into 2021, even in the back half, Phil, that's where your story would be.
Okay. Thanks a lot, Ward. Appreciate the color.
Thank you much.
Our next question comes from Seldon Clarke with Deutsche Bank. Your line is open.
Hey, thanks for squeezing me in. I guess just based on where October is trending right now, and obviously weather can throw a wrench into this, but just based on where October is trending and how you're positioned from a non-resi perspective and the improvement that you're talking to in regards to the outlook for state and federal funding, is it fair then to say that 3Q will probably represent the steepest of the volume declines throughout this sort of downturn?
Yeah, that wouldn't surprise me. Again, we'll come out with more granular information in February. If we think about it, Seldon, this is the big quarter. Keep in mind, this was a big quarter last year. This was the beast of compares. It's always interesting to look at how percentages can work in Q1, but I would suggest to you percentages in Q1 don't mean a lot because the tonnage is so slow. It would not surprise me that this on a percentage down, unless we see things just change dramatically. It would not surprise me that this would be your single steepest decline, to use your words.
Okay, that's helpful. Then you gave some context around aggregate potentially going from 28% to 45% of shipments with one of these highway bills. I guess, can you just help us understand sort of the relationship between a 28% or 45% increase in annual spending coming from the government and how that relates to your actual product demand if we go back and look at some of these historical highway bills?
Yeah.
It's obviously not going to be 28% growth. How do you think about that?
I guess the way we think of it, if we look at the states in which we see significant population trends, Really that's going to be our top five states, where there will be capacity needs and capacity issues. If you take that Georgia mobility program and think about that in more than just an Atlanta context, You think about Atlanta, You think also about Columbia, South Carolina, Jacksonville, Florida, Orlando, Raleigh, Charlotte, Then you start looking at lane miles added, that's your single most aggregate intensive undertaking because several things happen. One, it's taking a lot of tonnage, It's taking a lot of varied tonnage as well. You're putting base products down, you're eventually putting clean stone in either asphalt or concrete, That's going down. You're taking an entire array of more products.
Number one, that's actually very healthy for inventories. Number two, it's actually very healthy for the way that we can run our business. Now, can you take a crushing plant, hone it in some degree, and produce less base and more clean stone? Sort of, kind of. It's not a science in doing that because it's not that easy. As a practical matter, if you've got a wider array of products going out, that would tend to be the case if you have a new highway bill and you've got capacity that is being added in states. What that does from an operating efficiency and what it does from an inventory efficiency is incredibly helpful. Part of what we've seen over the last several years is what would appear to be a fairly significant outperformance in non-residential.
What I would tell you is non-residential has actually been quite good, but non-residential hasn't been really on fire. It's really that the public side of it has been slower than it should have been. If we see more infrastructure go, it's high spec material, it's material that we can deliver, and we think in these states in which we're operating, as they add needed capacity, it adds tonnage and it adds efficiency. I hope that helps.
Yeah, that is helpful. Thank you.
Our next question comes from David MacGregor with Longbow Research. Your line is now open.
Hey, good morning, everyone, or good afternoon now, I guess. Congratulations on a great quarter, Ward.
Thanks, David. Thank you very much. Thank you.
I guess a lot's been covered here in the past hour or so, I'll just make a couple of quick ones. I guess in ready-mix, it seems like maybe there's just a price pass-through issue. Do we catch that up in the fourth quarter? Is this just a timing issue, or is there something maybe more structural in the markets that's coming into play here?
No, I would say several things. One, we saw good price in Colorado, and we saw some mix shifts in Texas a little bit. I think that's largely what you're seeing. Look, the other piece of it is, the concrete business paid more for aggregates, and the concrete business paid more for cement. That's okay from where we sit, because we're providing most of the aggregates, and we're providing most of the cement.
Great.
That's a lot of what was going on there. Really, if you look at it, nice 2.2% per ton better on ASP. A lot of good things that we're seeing in ready-mix right now. In large measure, it helps undergird a very attractive upstream business. It's doing exactly what we would've thought.
Right. Second question is really just on Houston and in aggregates. You talked about the lower rail tons going into Houston. Is that a function of just what's happening in energy, or are you seeing congestion or any reduced level of service in rail?
The service in rail has been reasonably good, and it's really not so much Houston, it's really more South Texas when you get down to the pure LNG projects that are even closer to the water. That was really a piece of the mix issues in the Southwest, because if we had fewer tons coming out of those yards, as you know, those tons are transportation loaded, David. That was really the big shift there. It wasn't as much of a Houston metro per se issue because there's some very good projects going on in Houston, including the Grand Parkway. For example, we've seen a good amount of cement go to that.
As you may recall, David, actually cement is modestly lower priced in San Antonio than it is in Dallas, and things that are going to the Grand Parkway are really coming out of our Hunter facility. We're not seeing bad activity in Houston whatsoever. It was really more coastal oriented on that commentary.
Great. Thanks very much. Congrats on.
Thank you, David. See you.
Our next question comes from Michael Dudas with Vertical Research. Your line is open.
Good afternoon, gentlemen, Suzanne.
Hi, Michael.
Ward, we appreciate the insight on some of your top important states. Maybe you can highlight or call out a couple in the second five or others where you've seen some either positive or negative trends that might be helpful to help out a little bit more on, say, the volume expectations as some of these macro events impact second half 2021 and 2022.
Look, I'll certainly try. If we're looking at South Carolina, they've got a FY 2021 program of about $1.8 billion. That's up about 15%, so we like what we're seeing there. Remember, South Carolina did something the other year that was very un-South Carolina of them, and that is they raised the gas tax. They're taking that up incrementally over a period of six years. We're about halfway through that, so we're seeing good activity there. Part of what we're really heartened by is Kansas passed a 10-year, $10 billion funding plan. That basically doubles their funding over $8 billion over a 10-year plan, and we like where we see that business going. Keeping in mind, we've got a very attractive business in and around Kansas City, and we're seeing good activity at the airport there as well.
Our business in Indiana, just to be clear, we call it our Indiana district, or we have historically. It's really our Indianapolis district. What we've seen in that business, and the leadership there has just done a superb job of controlling costs exceptionally well. They really do deserve a call-out on that. They've equally done very well in making sure we're getting good recognition on pricing on what we're doing in that marketplace. I think Indiana is looking quite strong. If I'm looking at places, just to be completely open book with you on where we've seen more difficulty this year, it's been in places like Kentucky and portions of Southern Ohio. Kentucky DOT has not had its finest moment this year. I think equally you've heard that from others as they've gone through.
I think you would've heard a bit of that from Summit Materials and Anne's commentary earlier in the week as well. If we're looking at places like Maryland and we're looking at Virginia and Iowa and Nebraska, and as we've gone through those, just to give you a sense of it, Michael, that does round out our top 10 states, which is going to be 85% of our revenue. They're not things that we feel like are troubling to us as we look at Maryland, Virginia, Iowa, or Nebraska right now. Again, Maryland has a very significant P3 program, and the other states just tend to be very solid states. Remember, Iowans consume on average, more stone per capita than any place else because they go through a hard freeze-thaw cycle each year, and it's a big farm-to-market economy.
Equally, that's been an economy that has been served quite well by what's happening relative to data warehousing. We've seen Microsoft and Amazon and others not just build warehousing, but phases 2 and phases 3 and sometimes phases 4 of that. That's actually been quite good. The one area in the Midwest that has been more challenging this year has been what's not happened relative to wind energy. We called that out on some of the commentary that we had just breaking down between business in our East Group and business in our West Group. Hopefully that was responsive to taking a little bit deeper dive in the bottom five.
Ward, it certainly was, and that was intriguing about the factoid on Iowa. I was not aware of that. Thank you.
That's what we're here for. Take care, Michael.
Thank you. Thank you, Ward.
Our next question comes from Adam Thalhimer with Thompson Davis. Your line is now open.
Hey, nice quarter, guys.
Thank you, Adam.
Hey, can I ask a quick question, and then I'll turn it over. I wanted to ask on ready-mix, if you could comment on the backlogs in ready-mix and also the outlook for pricing, Ward?
No, happy to. It's interesting. The outlook on pricing is always a little bit more challenging, at least in half of it. Outlook in pricing in Colorado tends to be very attractive. Outlook on pricing in Texas continues to look pretty steady. I will tell you, as we look at backlogs year-over-year, they're up 3%. If you're looking at a very dynamic market, I like the way that that looks. Again, part of what we've done in Texas, in particular, Adam, is we've moved a certain degree of our volume in Texas from infrastructure, in some instances, to housing. I'll tell you very candidly why we did it. We wanted to have it in a little bit more of it in housing, one, because housing looked good. Two, housing does not tend to be as weather sensitive as infrastructure is.
That said, housing tends to have a little bit lower ASP. We're picking and choosing very much by design there. Again, we think pricing will be solid, and we think backlogs in that business right now are actually up in the Southwest.
Okay, perfect. Thanks, Ward.
Thank you, Adam.
Our next question comes from Adrian Huerta with JP Morgan. Your line is now open.
Hi, Ward. Good talking to you. Thank you for taking my question. You have mentioned in the past that there was room on recent acquisitions to increase prices. How far are you on that? Is there still room to increase prices from recent acquisitions?
Adrian, it's always a journey. It's like safety. We never think we're done. What I would say, if we go back and look at the way things have worked. One of the best examples I can give you is Maryland. We were talking about, just a moment ago, with Michael, what some of the states looked like that were not in our top five, and I spoke specifically to Maryland. What's interesting to me on that, Adrian, is Maryland for us in the Bluegrass transaction was not necessarily a consolidation play. We had a couple of facilities in that state. They were in the western part of the state, and most of what we acquired with Bluegrass that was in Maryland was really more in Baltimore Metro.
What we brought to that is a discipline, and we brought to it a sense of not being ashamed to make sure we're getting the right value for a product that we're making that meets state and federal specifications and that we think is not easy to do. Keeping in mind that on the infrastructure side, stone is about 10% of the cost of building a road. On the housing side, it's about 2% of the cost of a home. If we look in non-residential, it's somewhere between those two numbers. In other words, our product is never going to be what's going to make or break whether the project goes or not. Equally, our product isn't going to make or break whether that contractor is typically low or not.
At the same time, to do what we do with the skill that we do and do it as safely as we do, we want to make sure we're getting good value for something that's a depleting resource. That said, if we look on average at today's rates of taking stone out of the ground, we've got a century worth of reserves left. We don't have an issue of the stone going away. In a world that we think will continue to have higher regulatory barriers and burdens to entry, making sure we're getting value for this product is important. I will tell you equally, you can see what our average selling price is, and it's going to be in the low teens right now.
There are plenty of markets in the U.S. where we're selling aggregates for numbers that have a two in front of it, and we don't see those higher numbers having any degree of chilling effect on construction in those markets. This has been an area for our company that has been one of strength for a long time. Back to my point, this continues to be a journey. I think it's going to be an area of strength for years yet to come, Adrian.
Understood. Thank you.
Thank you, Adrian. Thank you all for joining our third quarter 2020 earnings conference call. Moving forward, we're confident in Martin Marietta's opportunities to build on our successful track record of strong financial, safety, and operational performance and remain focused on maximizing value for all shareholders. We look forward to discussing our fourth quarter and full year 2020 results in February. As always, we're available for any follow-up questions. Thank you for your time and continued support of Martin Marietta. Please stay safe and healthy.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.