What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-05-06 compared with 2022-02-04 · 130 added, 78 removed, 140 unchanged (60% of the section changed)

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Recent Developments

We did not incur significant disruptions from the COVID-19 pandemic during the three months ended December 31, 2021.

However, we continue to closely monitor the impact of the pandemic on all aspects of our business, including its impact on our customers, employees, suppliers and vendors.

Among the primary risks to our business from the pandemic are (i) employee absences, which could adversely affect our productivity and our ability to complete projects in accordance with our contractual obligations, and could require us to temporarily close our facilities or project sites, (ii) potential disruptions in our supply chains for raw materials or equipment, whether as a result of facility closures or otherwise, which could increase our labor and materials costs and impair our ability to manufacture HMA or the ability of our subcontractors to complete their required tasks, and (iii) the impact of the COVID-19 pandemic on our customers, which could cause these customers to cancel or delay current or prospective projects or become delinquent in their payments to us for work that we have performed.

These risks materialized in varying degrees during the three months ended December 31, 2021, but none of these risks, individually or in the aggregate, have significantly impacted our operations to date.

In addition, the extent to which our operations may be impacted by the COVID-19 pandemic going forward will also depend on the duration of the pandemic, the emergence of different COVID-19 variants, the efficacy and adoption rates of vaccines, and actions by government authorities to contain the outbreak or mitigate the impact of the pandemic.

Inflationary Trends

During the three months ended December 31, 2021, we continued to experience an upward trend in several inflation-sensitive inputs necessary for us to provide our products and services, including upward pressure on wages and increases in the cost of raw materials used to produce HMA and other items that are critical to our business, including fuel, concrete and steel.

During the three months and six months ended March 31, 2022, we continued to experience an upward trend in several inflation-sensitive inputs necessary for us to provide our products and services, including upward pressure on wages and increases in the cost of raw materials used to produce HMA and other items that are critical to our business, including fuel, concrete and steel.

In addition, we experienced some disruptions from various participants in our supply chain, including subcontractors, materials suppliers and equipment manufacturers, who provide the raw materials, equipment, vehicles, construction supplies and other services we require in order to manufacture HMA and perform our construction projects.

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However, we are limited in our ability to pass through increased costs for projects already in our backlog and, under those circumstances, may be unable to recoup losses or diminished profit margins by passing these costs through to our customers.

South Carolina Acquisition

On October 1, 2021, we acquired King Asphalt, Inc.

The acquisition established the Company's first platform company in South Carolina and added three HMA plants in the Greenville, South Carolina metro area.

North Carolina Acquisition

On March 7, 2022, the Company acquired substantially all of the assets of Southern Asphalt, Inc., an asphalt paving company headquartered in Burgaw, North Carolina.

The transaction provides access to the Wilmington, North Carolina metro area.

For further discussion regarding this transaction, see Note 4 - Business Acquisitions to the unaudited consolidated financial statements included elsewhere in this report.

Florida Acquisition

On October 18, 2021, we acquired the operations of J.

Miller Construction Inc.

The acquisition further enhances the Company’s vertical integration of construction services and supplements the Company’s capabilities in the greater Pensacola, Florida market area.

On March 18, 2022, the Company acquired substantially all of the assets of GAC Contractors, Inc., an asphalt paving, grading and site work company headquartered in Panama City, Florida.

The transaction enhances the Company's operational resources and capabilities in growing Panama City, Florida market area.

For further discussion regarding this transaction, see Note 4 - Business Acquisitions to the unaudited consolidated financial statements included elsewhere in this report.

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These price adjustment provisions are in place for most of our public infrastructure contracts, and we seek to include similar provisions in our private contracts.

Depreciation, Depletion and Amortization

Depreciation, Depletion, Accretion and Amortization

Property, plant and equipment are initially recorded at cost or, if acquired as a business combination, at fair value.

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Potential differences may include differences in capital structures, tax positions and the age and book depreciation of intangible and tangible assets.

The following table presents a reconciliation of net income, the most directly comparable measure calculated in accordance with GAAP, to Adjusted EBITDA and the calculation of Adjusted EBITDA Margin for the periods presented (in thousands, except percentages):

For the Three Months Ended December 31,

Net income $ 5,511 $ 7,871

For the Three Months Ended March 31, For the Six Months Ended March 31,

2022 2021 2022 2021

Net income (loss) $ (9,418) $ (4,935) $ (3,907) $ 2,936

Interest expense, net 859 298 2,123 766

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Management fees and expenses (1)

384 521 759 1,138

Settlement of legal claim and associated legal expenses (2)

— 3,876 — 4,232

Adjusted EBITDA $ 7,824 $ 10,998 $ 34,181 $ 34,479

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Adjusted EBITDA Margin 3.2 % 6.1 % 6.5 % 9.3 %

(1) Reflects fees and reimbursement of certain out-of-pocket expenses under a management services agreement with SunTx Capital Partners, the Company’s controlling stockholder (see Note 12 - Related Parties to the unaudited consolidated financial statements included elsewhere in this report).

(1) Reflects fees and reimbursement of certain out-of-pocket expenses under a management services agreement with an affiliate of SunTx Capital Partners, the Company’s controlling stockholder (see Note 12 - Related Parties to the unaudited consolidated financial statements included elsewhere in this report).

(2) Reflects legal expenses associated with a settlement agreement entered into in April 2021 unrelated to the Company's core operations.

The following table presents a reconciliation of net income, the most directly comparable measure calculated in accordance with GAAP, to adjusted net income for the periods presented (in thousands):

For the Three Months Ended December 31,

Net income $ 5,511 $ 7,871

Settlement of legal claim and associated legal expenses (1)

The following table presents a reconciliation of net income, the most directly comparable measure calculated in accordance with GAAP, to adjusted net income for the periods presented (unaudited in thousands):

For the Three Months Ended March 31, For the Six Months Ended March 31,

2022 2021 2022 2021

Net income (loss) $ (9,418) $ (4,935) $ (3,907) $ 2,936

Settlement of legal claim (1)

— 3,200 $ — $ 3,200

Legal expenses associated with settlement of legal claim — 676 $ — $ 1,032

Tax impact due to above reconciling items — (977) $ — $ (1,066)

Adjusted net income $ 5,511 $ 8,145

Adjusted net income (loss) $ (9,418) $ (2,036) $ (3,907) $ 6,102

(1) Reflects legal expenses associated with a settlement agreement entered into in April 2021 unrelated to the Company's core operations.

Results of Operations

Three Months Ended December 31, 2021 Compared to Three Months Ended December 31, 2020

The following table sets forth selected financial data for the three months ended December 31, 2021 and December 31, 2020 (unaudited in thousands, except percentages):

Three Months Ended March 31, 2022 Compared to Three Months Ended March 31, 2021

The following table sets forth selected financial data for the three months ended March 31, 2022 and 2021 (unaudited in thousands, except percentages):

Change From the Three Months Ended

For the Three Months Ended December 31, December 31, 2020

For the Three Months Ended March 31, March 31, 2021

to the Three Months Ended

2021 2020 December 31, 2021

2022 2021 March 31, 2022

Revenues Dollars % of

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Gain on sale of equipment, net 1,014 0.4 % 9 — % 1,005 11,166.7 %

Operating income (loss) (11,489) (4.7) % (6,394) (3.6) % (5,095) 79.7 %

Interest expense, net (859) (0.4) % (298) (0.2) % (561) 188.3 %

Other income (expense) 43 — % 244 0.2 % (201) (82.4) %

Income (loss) before provision for income taxes and earnings from investment in joint venture (12,305) (5.1) % (6,448) (3.6) % (5,857) 90.8 %

Provision for income taxes (2,887) (1.2) % (1,513) (0.8) % (1,374) 90.8 %

Earnings from investment in joint venture — — % — — % — — %

Net income (loss) $ (9,418) (3.9) % $ (4,935) (2.8) % $ (4,483) 90.8 %

Adjusted EBITDA $ 7,824 3.2 % $ 10,998 6.1 % $ (3,174) (28.9) %

Adjusted net income (loss) $ (9,418) (3.9) % $ (2,036) (1.1) % $ (7,382) 362.6 %

Revenues for the three months ended March 31, 2022 increased $64.3 million, or 35.9%, to $243.4 million from $179.1 million for the three months ended March 31, 2021.

The increase included $29.9 million of revenues attributable to acquisitions completed subsequent to March 31, 2021 and an increase of approximately $34.4 million of revenues in our existing markets from contract work and sales of HMA and aggregates to third parties.

The 19.2% increase in revenues in our existing markets was due to a strong demand in both public and private work.

Gross Profit.

Gross profit for the three months ended March 31, 2022 decreased $5.6 million, or 30.8%, to $12.5 million from $18.1 million for the three months ended March 31, 2021.

The lower gross profit was primarily due to (i) lower profit margins on the projects we assumed in connection with recent acquisitions and (ii) continued lower margins due to increases in the costs of raw materials, fuel, labor, trucking and supply chain issues.

General and Administrative Expenses.

General and administrative expenses for the three months ended March 31, 2022 increased $0.5 million, or 2.1%, to $25.0 million from $24.5 million for the three months ended March 31, 2021.

The increase was primarily the result of (i) a $1.3 million increase in equity-based compensation expense, (ii) a $2.7 million increase attributable to general and administrative expenses associated with the operations of businesses acquired subsequent to March 31, 2021, and (iii) a $1.2 million increase in various professional fees, primarily driven by business acquisitions, information technology expenses and increased accounting and consulting fees.

These increases were partially offset by a $3.9 million decrease in legal expenses primarily attributable to a legal settlement and associated legal fees in April 2021 unrelated to the Company's core operations.

Interest Expense, Net.

Interest expense, net for the three months ended March 31, 2022 increased $0.6 million, to $0.9 million compared to $0.3 million for the three months ended March 31, 2021.

The increase in interest expense, net was due to an increase in the average principal debt balance outstanding during the three months ended March 31, 2022 compared to the corresponding period in 2021.

Provision for Income Taxes.

Our effective tax rate for the three months ended March 31, 2022 and 2021 was 23.5%.

Net Income (Loss).

Net income (loss) decreased $4.5 million to a net loss of $9.4 million for the three months ended March 31, 2022, compared to net loss of $4.9 million for the three months ended March 31, 2021.

The decrease in net income (loss) was primarily a result of lower gross profit, higher general and administrative expenses and higher interest expense, net, all as described above.

Adjusted EBITDA and Adjusted EBITDA Margin.

Adjusted EBITDA and Adjusted EBITDA Margin were $7.8 million and 3.2%, respectively, for the three months ended March 31, 2022, compared to $11.0 million and 6.1%, respectively, for the three months ended March 31, 2021.

The decrease in Adjusted EBITDA was the result of lower gross profit and increases in general and administrative expenses and interest expense, net, partially offset by an increase in depreciation, depletion, accretion and amortization of long-lived assets and a reduction in expenses related to a legal settlement.

The lower Adjusted EBITDA Margin was primarily a result of a decrease in Adjusted EBITDA and an increase in revenues, all as described above.

See the description of Adjusted EBITDA and Adjusted EBITDA Margin, as well as a reconciliation of Adjusted EBITDA to net income, under the heading “How We Assess Performance of Our Business”.

Adjusted Net Income (Loss).

Adjusted net income (loss) decreased $7.4 million to an adjusted net loss of $9.4 million for the three months ended March 31, 2022, compared to adjusted net loss of $2.0 million for the three months ended March 31, 2021.

The decrease in adjusted net income (loss) was primarily a result of lower gross profit and higher general and administrative expenses and interest expense, net, all as described above.

Six Months Ended March 31, 2022 Compared to Six Months Ended March 31, 2021

The following table sets forth selected financial data for the six months ended March 31, 2022 and 2021 (unaudited in thousands, except percentages):

Change From the Six Months Ended

For the Six Months Ended March 31, March 31, 2021

to the Six Months Ended

2022 2021 March 31, 2022

Revenues Dollars % of

Revenues $ 528,349 100.0 % $ 370,041 100.0 % $ 158,308 42.8 %

Cost of revenues 482,888 91.4 % 321,375 86.8 % 161,513 50.3 %

Gross profit 45,461 8.6 % 48,666 13.2 % (3,205) (6.6) %

General and administrative expenses (49,946) (9.5) % (44,559) (12.1) % (5,387) 12.1 %

Gain on sale of equipment, net 1,455 0.3 % 342 0.1 % 1,113 325.4 %

Operating income (3,030) (0.6) % 4,449 1.2 % (7,479) (168.1) %

Interest expense, net (2,123) (0.4) % (766) (0.2) % (1,357) 177.2 %

Other income 116 — % 165 — % (49) (29.7) %

Other income (expense) 159 0.1 % 409 0.1 % (250) (61.1) %

Income before provision for income taxes and earnings from investment in joint venture (4,994) (0.9) % 4,092 1.1 % (9,086) (222.0) %

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Adjusted net income $ (3,907) (0.7) % $ 6,102 1.6 % $ (10,009) (164.0) %

Revenues for the three months ended December 31, 2021 increased $94.1 million, or 49.3%, to $285.0 million from $190.9 million for the three months ended December 31, 2020.

The increase included $37.8 million of revenues attributable to acquisitions completed subsequent to December 31, 2020 and an increase of approximately $56.3 million of revenues in our existing markets from contract work and sales of HMA and aggregates to third parties.

Revenues for the six months ended March 31, 2022 increased $158.3 million, or 42.8%, to $528.3 million from $370.0 million for the six months ended March 31, 2021.

The increase included $67.6 million of revenues attributable to acquisitions completed subsequent to March 31, 2021 and an increase of approximately $90.7 million of revenues in our existing markets from contract work and sales of HMA and aggregates to third parties.

The 24.5% increase in revenues in our existing markets was due to a strong demand in both public and private work.

Gross Profit.

Gross profit for the three months ended December 31, 2021 increased $2.4 million, or 7.7%, to $33.0 million from $30.6 million for the three months ended December 31, 2020.

The increase in gross profit was primarily the result of the 49.3%

increase in revenue in the three months ended December 31, 2021 compared to the three months ended December 31, 2020.

The lower gross profit margin was due to (i) lower profit margins on the projects we assumed in connection with acquisitions completed during the three months ended December 31, 2021 and the fiscal year ended September 30, 2021, and (ii) continued lower margins due to increases in the costs of raw materials, fuel, labor and trucking, and supply chain issues.

Gross profit for the six months ended March 31, 2022 decreased $3.2 million, or 6.6%, to $45.5 million from $48.7 million for the six months ended March 31, 2021.

General and Administrative Expenses.

General and administrative expenses for the three months ended December 31, 2021 increased $4.8 million, or 24.2%, to $24.9 million from $20.1 million for the three months ended December 31, 2020.

The increase was primarily the result of (i) a $1.1 million increase in equity-based compensation expense, (ii) a $2.3 million increase attributable to general and administrative expenses associated with the businesses acquired subsequent to December 31, 2020, and (iii) a $1.2 million increase in other professional fees, primarily driven by expenses incurred in support of acquisition activities, information technology expenses and increased accounting and consulting fees.

General and administrative expenses for the six months ended March 31, 2022 increased $5.4 million, or 12.1%, to $49.9 million from $44.6 million for the six months ended March 31, 2021.

The increase was primarily the result of (i) a $2.4 million increase in equity-based compensation expense, (ii) a $5.0 million increase attributable to general and administrative expenses associated with the operations of businesses acquired subsequent to March 31, 2021, and (iii) a $2.4 million increase in various professional fees, primarily driven by business acquisitions, information technology expenses and increased accounting and consulting fees.

These increases were partially offset by a $4.2 million decrease in legal expenses associated with a legal settlement and associated legal fees in April 2021 unrelated to the Company's core operations.

Interest Expense, Net.

Interest expense, net for the three months ended December 31, 2021 increased $0.8 million, or 170.1%, to $1.3 million compared to $0.5 million for the three months ended December 31, 2020.

The increase in interest expense was due to an increase in the average principal debt balance outstanding during the three months ended December 31, 2021 compared to the corresponding period in 2020.

Interest expense, net for the six months ended March 31, 2022 increased $1.3 million, to $2.1 million compared to $0.8 million for the six months ended March 31, 2021.

The increase in interest expense was due to an increase in the average principal debt balance outstanding during the six months ended March 31, 2022 compared to the corresponding period in 2021.

Provision for Income Taxes.

Our effective tax rate decreased to 24.6% for the three months ended December 31, 2021, from 25.4% for the three months ended December 31, 2020.

Our lower effective tax rate during the three months ended December 31, 2021 was the result of a benefit of $0.1 million related to an amended state return filed during the period.

Net income decreased $2.4 million, or 30.0%, to $5.5 million for the three months ended December 31, 2021, compared to $7.9 million for the three months ended December 31, 2020.

The decrease in net income was a result of an increase in general and administrative expenses, partially offset by an increase in gross profit, all as described above.

Our effective tax rate decreased to 21.8% for the six months ended March 31, 2022, from 28.4% for the six months ended March 31, 2021.

Our lower effective tax rate for the six months ended March 31, 2022 was due to differences in state tax rates at our operating subsidiaries.

Net Income (Loss).

Net income decreased $6.8 million to a net loss of $3.9 million for the six months ended March 31, 2022, compared to net income of $2.9 million for the six months ended March 31, 2021.

The decrease in net income (loss) was primarily a result of lower gross profit, higher general and administrative expenses and higher interest expense, net, all as described above.

Adjusted EBITDA and Adjusted EBITDA Margin.

Adjusted EBITDA and Adjusted EBITDA Margin were $26.4 million and 9.2%, respectively, for the three months ended December 31, 2021, compared to $23.5 million and 12.3%, respectively, for the three months ended December 31, 2020.

The increase in Adjusted EBITDA was the result of a higher gross profit and depreciation, depletion, accretion and amortization of long-lived assets, partially offset by an increase in general and administrative expenses and interest expense.

The lower Adjusted EBITDA Margin was primarily a result of the increase in revenues during the period.

Adjusted EBITDA and Adjusted EBITDA Margin were $34.2 million and 6.5%, respectively, for the six months ended March 31, 2022, compared to $34.5 million and 9.3%, respectively, for the six months ended March 31, 2021.

The lower Adjusted EBITDA Margin was primarily a result of a decrease in Adjusted EBITDA and an increase in revenues, all as described above.

See the description of Adjusted EBITDA and Adjusted EBITDA Margin, as well as a reconciliation of Adjusted EBITDA to net income, under the heading “How We Assess Performance of Our Business”.

Adjusted Net Income.

Adjusted net income decreased $2.6 million, or 32.3%, to adjusted net income of $5.5 million for the three months ended December 31, 2021, compared to adjusted net income of $8.1 million for the three months ended December 31, 2020.

The decrease in adjusted net income was primarily a result of lower gross profit and higher general and administrative expenses, all as described above.

Adjusted Net Income (Loss).

Adjusted net income decreased $10.0 million to adjusted net loss of $3.9 million for the six months ended March 31, 2022, compared to adjusted net income of $6.1 million for the six months ended March 31, 2021.

The decrease in adjusted net income (loss) was primarily a result of lower gross profit, higher general and administrative expenses, and higher interest expense, net, all as described above.

Inflation and Price Changes

As described above under the heading “Inflationary Trends,” during the three months ended December 31, 2021, we continued to experience an upward trend in several inflation-sensitive inputs necessary for us to provide our products and services, including upward pressure on wages and increases in the cost of raw materials used to produce HMA and other items that are critical to our business.

Inflation had an immaterial impact on our results of operations for the three months ended December 31, 2020 due to relatively low inflation in the United States during that period and our ability to recover increasing costs by obtaining higher prices for our products, including sale price escalator clauses in most of our public infrastructure sector contracts.

As described above under the heading “Inflationary Trends,” during the three and six months ended March 31, 2022, we continued to experience an upward trend in several inflation-sensitive inputs necessary for us to provide our products and services, including upward pressure on wages and increases in the cost of raw materials used to produce HMA and other items that are critical to our business.

Inflation had an immaterial impact on our results of operations for the three and six months ended March 31, 2021 due to relatively low inflation in the United States during that period and our ability to recover increasing costs by obtaining higher prices for our products, including sale price escalator clauses in most of our public infrastructure sector contracts.

Liquidity and Capital Resources

Cash Flows Analysis

The following table sets forth our cash flows for the periods indicated (in thousands):

For the Three Months Ended December 31,

Net cash provided by (used in) operating activities, net of acquisitions $ (577) $ 709

The following table sets forth our cash flows for the periods indicated (unaudited in thousands):

For the Six Months Ended March 31,

Net cash provided by operating activities, net of acquisition $ 3,294 $ 2,398

Net cash used in investing activities (140,177) (110,465)

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Operating Activities

During the three months ended December 31, 2021, cash used in operating activities, net of acquisitions, was $0.6 million, primarily as a result of:

• net income of $5.5 million, including $15.9 million of depreciation, depletion, accretion and amortization of long-lived assets and equity-based compensation expense of $1.5 million;

• an increase in inventories of $2.5 million due to acquisitions and normal fluctuations in our inventory cycle;

• an increase in prepaid expenses and other current assets of $3.5 million due to the timing of payments for various insurance policies and expenses;

During the six months ended March 31, 2022, cash provided by operating activities, net of acquisitions, was $3.3 million, primarily as a result of:

• net loss of $3.9 million, including $33.0 million of depreciation, depletion, accretion and amortization of long-lived assets, unrealized gains on derivative instruments of $2.1 million and equity-based compensation expense of $3.2 million;

• an increase in contracts receivable including retainage, net, of $3.8 million as a result of higher overall revenues due to acquisitions and growth in existing markets;

• an increase in prepaid expenses and other current assets of $8.2 million primarily due to overpayment of federal and state income taxes and the timing of payments under our insurance policies;

• an increase in inventories of $13.7 million due to increased inventories from acquisitions, higher inventory costs and normal fluctuations in our inventory cycle;

• a decrease in accounts payable and accrued expenses and other current liabilities of $14.4 million due to the timing of processing transactions in our accounts payable cycle;

• a net increase in the difference between costs and estimated earnings in excess of billings on uncompleted contracts and billings in excess of costs and estimated earnings on uncompleted contracts of $5.8 million due to the timing of performing and closing projects.

During the three months ended December 31, 2020, cash provided by operating activities, net of acquisitions, was $0.7 million, primarily as a result of:

• net income of $7.9 million, including $11.1 million of depreciation, depletion, accretion and amortization of long-lived assets and equity-based compensation expense of $0.4 million;

• a decrease in contracts receivable including retainage, net, of $18.5 million due to the timing of processing transactions in our accounts receivable cycle;

• a net increase of $11.0 million in the difference between costs and estimated earnings in excess of billings on uncompleted contracts and billings in excess of costs and estimated earnings on uncompleted contracts due to the timing of performing and closing projects.

During the six months ended March 31, 2021, cash provided by operating activities, net of acquisitions, was $2.4 million, primarily as a result of:

• net income of $2.9 million, including $23.4 million of depreciation, depletion, accretion and amortization of long-lived assets and unrealized gains on derivative instruments of $2.4 million;

• a decrease in contracts receivable including retainage, net, of $6.3 million due to normal fluctuations resulting from the timing of processing transactions in our accounts receivable cycle;

• an increase in prepaid expenses and other current assets of $4.3 million primarily due to overpayment of federal and state income taxes and the timing of payments under our insurance policies;

• an increase in inventories of $3.5 million due to increased inventories from acquisitions and normal fluctuations in our inventory cycle;

• a decrease in accounts payable and accrued expenses and other current liabilities of $2.5 million due to the timing of processing transactions in our accounts payable cycle;

• a net decrease in the difference between costs and estimated earnings in excess of billings on uncompleted contracts and billings in excess of costs and estimated earnings on uncompleted contracts of $7.0 million due to the timing of performing and closing projects.

• a net decrease of $17.1 million in the difference between costs and estimated earnings in excess of billings on uncompleted contracts and billings in excess of costs and estimated earnings on uncompleted contracts due to the timing of performing and closing projects.

Investing Activities

During the three months ended December 31, 2021, cash used in investing activities was $80.3 million, of which $65.9 million related to acquisitions completed in the period and $15.1 million was invested in property, plant and equipment, partially offset by $0.7 million of proceeds from the sale of equipment.

During the three months ended December 31, 2020, cash used in investing activities was $94.1 million, of which $84.1 million related to acquisitions completed in the period and $10.5 million was invested in property, plant and equipment, partially offset by $0.5 million of proceeds from the sale of equipment.

During the six months ended March 31, 2022, cash used in investing activities was $140.2 million, of which $102.9 million related to acquisitions completed in the period, $34.7 million was invested in property, plant and equipment and $6.4 million was invested in restricted investments by the Captive, partially offset by $3.8 million of proceeds from the sale of equipment.

During the six months ended March 31, 2021, cash used in investing activities was $110.5 million, of which $84.5 million related to acquisitions completed in the period and $26.9 million was invested in property, plant and equipment, partially offset by $0.9 million of proceeds from the sale of equipment.

Financing Activities

During the three months ended December 31, 2021, cash provided by financing activities was $67.5 million.

During the six months ended March 31, 2022, cash provided by financing activities was $111.0 million.

We received $116.0 million of proceeds from our Revolving Credit Facility, primarily used for acquisitions completed in the period.

This cash flow was offset by $2.5 million of principal payments on long-term debt.

During the three months ended December 31, 2020, cash used in financing activities was $3.3 million, representing the repayment of principal on long-term debt during the period.

This increase in cash was offset by $5.0 million of principal payments on long-term debt.

During the six months ended March 31, 2021, cash used in financing activities was $6.5 million, representing the repayment of principal on long-term debt during such period.

Credit Agreement

We and each of our subsidiaries are parties to the Credit Agreement, which provides for the Term Loan and the Revolving Credit Facility.

At December 31, 2021 and September 30, 2021, we had $195.0 million and $197.5 million, respectively, of principal outstanding under the Term Loan, $90.0 million and $20.0 million, respectively, of principal outstanding under the Revolving Credit Facility, and availability of $123.7 million and $193.7 million, respectively, under the Revolving Credit Facility, including reduction for outstanding letters of credit.

The obligations of our subsidiaries under the Term Loan and the Revolving Credit Facility are secured by a first priority security interest in substantially all of our assets.

At March 31, 2022 and September 30, 2021, we had $192.5 million and $197.5 million, respectively, of principal outstanding under the Term Loan, $136.0 million and $20.0 million, respectively, of principal outstanding under the Revolving Credit Facility, and availability of $77.7 million and $193.7 million, respectively, under the Revolving Credit Facility, including reduction for outstanding letters of credit.

Our obligations under the Term Loan and the Revolving Credit Facility are secured by a first priority security interest in substantially all of our assets.

The Credit Agreement requires the Company to satisfy certain financial covenants, including a minimum fixed charge coverage ratio of 1.20-to-1.00 and a maximum consolidated leverage ratio of 3.00-to-1.00, subject to certain adjustments.

At December 31, 2021 and September 30, 2021, our fixed charge coverage ratio was 3.14-to-1.00 and 3.29-to-1.00, respectively, and our consolidated leverage ratio was 2.49-to-1.00 and 1.99-to-1.00, respectively.

At March 31, 2022 and September 30, 2021, our fixed charge coverage ratio was 3.24-to-1.00 and 3.29-to-1.00, respectively, and our consolidated leverage ratio was 2.74-to-1.00 and 1.99-to-1.00, respectively.

From time to time, the Company has entered into interest rate swap agreements to hedge against the risk of changes in interest rates.

At December 31, 2021 and September 30, 2021, the aggregate notional value of these interest rate swap agreements was $196.3 million and $198.3 million, respectively, and the fair value was $1.5 million and $(0.8) million, respectively, which is included within other assets, other current liabilities or other long-term liabilities on the Company’s Consolidated Balance Sheets.

For more information about the Credit Amendment, see Note 8 - Debt to the unaudited consolidated financial statements included elsewhere in this report.

At March 31, 2022 and September 30, 2021, the aggregate notional value of these interest rate swap agreements was $194.2 million and $198.3 million, respectively, and the fair value was $10.0 million and $(0.8) million, respectively, which is included within other assets, other current liabilities or other long-term liabilities on the Company’s Consolidated Balance Sheets.

For more information about the Credit Agreement, see Note 8 - Debt to the unaudited consolidated financial statements included elsewhere in this report.

Capital Requirements and Sources of Liquidity

During the three months ended December 31, 2021 and 2020, our capital expenditures were approximately $15.1 million and $10.5 million, respectively.

During the six months ended March 31, 2022 and 2021, our capital expenditures were approximately $34.7 million and $26.9 million, respectively.

Our capital expenditures are typically made during the same fiscal year in which they are approved.

At December 31, 2021, our commitments for capital expenditures were not material to our financial condition or results of operations on a consolidated basis.

At March 31, 2022, our commitments for capital expenditures were not material to our financial condition or results of operations on a consolidated basis.

For fiscal 2022, we expect total capital expenditures to be $60.0 million to $65.0 million.

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We believe that our operating cash flow and available borrowings under the Credit Agreement will be sufficient to fund our operations and planned capital expenditures for at least the next 12 months.

However, future cash flows are subject to a number of variables, including the potential impacts of COVID-19, and significant additional capital expenditures will be required to conduct our operations.

However, future cash flows are subject to a number of variables,

including the potential impacts of inflation and supply chain constraints, and significant additional capital expenditures will be required to conduct our operations.

There can be no assurance that operations and other capital resources will provide sufficient cash to maintain planned or future levels of capital expenditures.

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If we seek additional capital, we may do so through borrowings under the Credit Agreement, joint ventures, asset sales, offerings of debt or equity securities or other means.

However, the unprecedented public health and governmental efforts to contain the spread of COVID-19 have created significant uncertainty as to general economic conditions for fiscal 2022 and beyond, and our ability to engage in any such transactions may be constrained by economic conditions and other factors outside of our control.

However, our ability to engage in any such transactions may be constrained by economic conditions and other factors outside of our control.

We cannot guarantee that additional capital will be available on acceptable terms or at all.

unable to obtain the funds we need, we may not be able to complete acquisitions that may be favorable to us or finance the capital expenditures necessary to conduct our operations.

If we are unable to obtain the funds we need, we may not be able to complete acquisitions that may be favorable to us or finance the capital expenditures necessary to conduct our operations.

Contractual Obligations

The following table summarizes our significant obligations outstanding as of December 31, 2021:

The following table summarizes our significant obligations outstanding as of March 31, 2022:

Payments Due by Fiscal Year

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Off-Balance Sheet Arrangements

As of December 31, 2021, the Company had aggregate letters of credit outstanding in the amount of $11.3 million, future purchase commitments of $3.4 million for diesel fuel and $2.3 million of minimum royalty payments related to aggregates facilities.

As of March 31, 2022, the Company had aggregate letters of credit outstanding in the amount of $11.3 million, future purchase commitments of $7.7 million for diesel fuel and natural gas and $2.6 million of minimum royalty payments related to aggregates facilities.

Other than the letters of credit, future purchase commitments and minimum royalty payments, we do not currently have any off-balance sheet arrangements that have, or are reasonably likely to have, a material current or future effect on our financial condition, changes in our financial condition, revenue or expenses, results of operations, liquidity, capital expenditures or capital resources.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis