What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-08-05 compared with 2022-05-06 · 102 added, 100 removed, 170 unchanged (54% of the section changed)

17 unchanged sentences

Inflationary Trends

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.

During the three months and nine months ended June 30, 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.

1 unchanged sentence

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.

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 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.

Amended and Restated Credit Agreement

On June 30, 2022, we entered into a Third Amended and Restated Credit Agreement.

The Credit Agreement provides for (i) a Term Loan in an initial aggregate principal amount of $250.0 million, the full amount of which was drawn at closing, (ii) a Revolving Credit Facility in an initial aggregate principal amount of $325.0 million, and (iii) a delayed draw term loan facility in an initial aggregate principal amount of $50.0 million.

Among other things, the proceeds of the Term Loan were used to refinance our indebtedness under our prior credit facility.

For further discussion regarding the Credit Agreement, see Note 8 - Debt to the unaudited consolidated financial statements included elsewhere in this report.

How We Assess Performance of Our Business

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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 (unaudited in thousands, except percentages):

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

For the Three Months Ended June 30, For the Nine Months Ended June 30,

2022 2021 2022 2021

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

Net income $ 12,168 $ 9,340 $ 8,261 $ 12,276

Interest expense, net 2,054 568 4,177 1,334

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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,

For the Three Months Ended June 30, For the Nine Months Ended June 30,

2022 2021 2022 2021

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

Net income $ 12,168 $ 9,340 $ 8,261 $ 12,276

Settlement of legal claim (1)

1 unchanged sentence

Legal expenses associated with settlement of legal claim (1)

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

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

— 134 $ — $ 1,166

Adjusted net income $ 12,168 $ 9,474 $ 8,261 $ 16,642

(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 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):

Three Months Ended June 30, 2022 Compared to Three Months Ended June 30, 2021

The following table sets forth selected financial data for the three months ended June 30, 2022 and 2021 (unaudited in thousands, except percentages):

Change From the Three Months Ended

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

For the Three Months Ended June 30, June 30, 2021

to the Three Months Ended

2022 2021 March 31, 2022

2022 2021 June 30, 2022

Revenues Dollars % of

4 unchanged sentences

Gain on sale of equipment, net 333 0.1 % 835 0.3 % (502) (60.1) %

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

Operating income 17,999 4.7 % 14,257 5.4 % 3,742 26.2 %

Interest expense, net (2,054) (0.5) % (568) (0.2) % (1,486) 261.6 %

Other income (expense) 178 — % 252 0.1 % (74) (29.4) %

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 %

Income before provision for income taxes and earnings from investment in joint venture 16,123 4.2 % 13,941 5.3 % 2,182 15.7 %

Provision for income taxes 3,955 1.0 % 4,600 1.8 % (645) (14.0) %

Earnings from investment in joint venture — — % (1) 0.1 % 1 (100.0) %

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

Net income $ 12,168 3.2 % $ 9,340 3.6 % $ 2,828 30.3 %

Adjusted EBITDA $ 37,639 9.9 % $ 29,027 11.1 % $ 8,612 29.7 %

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.

Adjusted net income $ 12,168 3.2 % $ 9,474 3.6 % $ 2,694 28.4 %

Revenues for the three months ended June 30, 2022 increased $118.6 million, or 45.3%, to $380.3 million from $261.7 million for the three months ended June 30, 2021.

The increase included $53.1 million of revenues attributable to acquisitions completed subsequent to June 30, 2021 and an increase of approximately $65.5 million of revenues in our existing markets from contract work and sales of HMA and aggregates to third parties.

The 25.0% increase in revenues in our existing markets was due to 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.

Gross profit for the three months ended June 30, 2022 increased $7.7 million, or 20.8%, to $44.3 million from $36.6 million for the three months ended June 30, 2021.

The increase in gross profit was primarily the result of the 45.3% increase in revenues for the three months ended June 30, 2022 compared to the three months ended June 30, 2021.

The lower gross profit margin was due to (i) lower profit margins on the projects we assumed in connection with recent acquisitions and (ii) increases in the cost of raw materials, fuel, labor, and trucking, and (iii) 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.

General and administrative expenses for the three months ended June 30, 2022 increased $3.4 million, or 14.6%, to $26.6 million from $23.2 million for the three months ended June 30, 2021.

The increase was primarily the result of (i) a $0.5 million increase in equity-based compensation expense, and (ii) a $2.3 million increase attributable to general and administrative expenses associated with the operations of businesses acquired subsequent to June 30, 2021.

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.

Interest expense, net for the three months ended June 30, 2022 increased $1.5 million, to $2.1 million compared to $0.6 million for the three months ended June 30, 2021.

The increase in interest expense, net was due to an increase in the average principal debt balance outstanding and higher interest rates during the three months ended June 30, 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.

Our effective tax rate decreased to 24.5% for the three months ended June 30, 2022, from 33.0% for the three months ended June 30, 2021.

Our lower effective tax rate during the three months ended June 30, 2022 was the result of an unfavorable impact of a non-deductible legal settlement incurred in the three months ended June 30, 2021.

Net income increased $2.9 million to $12.2 million for the three months ended June 30, 2022, compared to $9.3 million for the three months ended June 30, 2021.

The increase in net income was primarily a result of higher revenues and related gross profit, partially offset by an increase in general and administrative expenses and 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.

Adjusted EBITDA and Adjusted EBITDA Margin were $37.6 million and 9.9%, respectively, for the three months ended June 30, 2022, compared to $29.0 million and 11.1%, respectively, for the three months ended June 30, 2021.

The increase in Adjusted EBITDA primarily resulted from higher gross profit, and an increase in depreciation, depletion, accretion and amortization of long-lived assets, partially offset by higher general and administrative expenses.

The lower Adjusted EBITDA Margin was primarily a result of a lower gross profit percentage, partially offset by a lower general and administrative expense percentage, 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

Adjusted Net Income.

Adjusted net income increased $2.7 million to $12.2 million for the three months ended June 30, 2022, compared to $9.5 million for the three months ended June 30, 2021.

The increase in adjusted net income was primarily a result of higher revenues and related gross profit, partially offset by an increase in general and administrative expenses and interest expense, net, all as described above.

Nine Months Ended June 30, 2022 Compared to Nine Months Ended June 30, 2021

The following table sets forth selected financial data for the nine months ended June 30, 2022 and 2021 (unaudited in thousands, except percentages):

Change From the Nine Months Ended

For the Nine Months Ended June 30, June 30, 2021

to the Nine Months Ended

2022 2021 June 30, 2022

Revenues Dollars % of

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Adjusted net income $ 8,261 0.9 % $ 16,642 2.6 % $ (8,381) (50.4) %

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.

Revenues for the nine months ended June 30, 2022 increased $276.9 million, or 43.8%, to $908.6 million from $631.7 million for the nine months ended June 30, 2021.

The increase included approximately $120.7 million of revenues attributable to acquisitions completed subsequent to June 30, 2021 and an increase of approximately $156.2 million of revenues in our existing markets from contract work and sales of HMA and aggregates to third parties.

The 24.7% increase in revenues in our existing markets was due to strong demand in both public and private work.

Gross Profit.

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.

Gross profit for the nine months ended June 30, 2022 increased $4.4 million, or 5.2%, to $89.7 million from $85.3 million for the nine months ended June 30, 2021.

The increase in gross profit was primarily the result of the 43.8% increase in revenues for the nine months ended June 30, 2022 compared to the nine months ended June 30, 2021.

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

General and Administrative Expenses.

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.

General and administrative expenses for the nine months ended June 30, 2022 increased $8.7 million, or 13.0%, to $76.5 million from $67.8 million for the nine months ended June 30, 2021.

The increase was primarily the result of (i) a $2.9 million increase in equity-based compensation expense, (ii) a $5.2 million increase attributable to general and administrative expenses associated with the operations of businesses acquired subsequent to June 30, 2021, (iii) a $2.1 million increase in various professional fees, primarily driven by business acquisitions, information technology expenses and increased accounting and consulting fees, and (iv) a $3.8 million increase in management personnel payroll and benefits.

These increases were partially offset by a $4.4 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 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.

Interest expense, net for the nine months ended June 30, 2022 increased $2.9 million, to $4.2 million compared to $1.3 million for the nine months ended June 30, 2021.

The increase in interest expense was due to an increase in the average principal debt balance outstanding and higher interest rates during the nine months ended June 30, 2022 compared to the corresponding period in 2021.

Provision for Income Taxes.

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.

Our effective tax rate decreased to 25.8% for the nine months ended June 30, 2022, from 32.0% for the nine months ended June 30, 2021.

Our lower effective tax rate during the nine months ended June 30, 2022 was the result of an unfavorable impact of a non-deductible legal settlement incurred in the nine months ended June 30, 2021.

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.

Net income decreased $4.0 million to $8.3 million for the nine months ended June 30, 2022, compared to $12.3 million for the nine months ended June 30, 2021.

The decrease in net income was primarily a result of higher general and administrative expenses and higher interest expense, net, partially offset by higher revenues and related gross profit, all as described above.

Adjusted EBITDA and Adjusted EBITDA Margin.

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.

Adjusted EBITDA and Adjusted EBITDA Margin were $71.8 million and 7.9%, respectively, for the nine months ended June 30, 2022, compared to $63.5 million and 10.1%, respectively, for the nine months ended June 30, 2021.

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

The lower Adjusted EBITDA Margin was primarily a result of a lower gross profit percentage, partially offset by a lower general and administrative expense percentage, 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 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.

Adjusted Net Income.

Adjusted net income decreased $8.4 million to $8.3 million for the nine months ended June 30, 2022, compared to $16.6 million for the nine months ended June 30, 2021.

The decrease in adjusted net income was primarily a result of 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 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.

As described above under the heading “Inflationary Trends,” during the three and nine months ended June 30, 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 nine months ended June 30, 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

1 unchanged sentence

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

For the Nine Months Ended June 30,

Net cash (used by) provided by operating activities, net of acquisition $ (9,721) $ 9,334

Net cash used in investing activities (158,607) (129,530)

Net cash provided by (used in) financing activities 110,961 (6,500)

Net cash provided by financing activities 137,261 106,348

Net change in cash and cash equivalents $ (31,067) $ (13,848)

Operating Activities

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;

During the nine months ended June 30, 2022, cash used by operating activities, net of acquisitions, was $9.7 million, primarily as a result of:

• net income of $8.3 million, including $50.3 million of depreciation, depletion, accretion and amortization of long-lived assets, unrealized gains on derivative instruments of $2.6 million and equity-based compensation expense of $5.1 million;

• an increase in contracts receivable including retainage, net, of $71.9 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 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;

• an increase in prepaid expenses and other current assets of $2.3 million primarily due to timing of deposits for federal and state income taxes and the timing of payments under our insurance policies;

• an increase in inventories of $21.8 million due to inventory acquired in acquisitions, higher inventory costs and normal fluctuations in our inventory cycle;

• an increase in accounts payable and accrued expenses and other current liabilities of $23.1 million due to increased construction activity;

• a net increase of $3.9 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 and higher revenue from construction activities.

During the nine months ended June 30, 2021, cash provided by operating activities, net of acquisitions, was $9.3 million, primarily as a result of:

• net income of $12.3 million, including $36.0 million of depreciation, depletion, accretion and amortization of long-lived assets, unrealized gains on derivative instruments of $3.1 million and equity-based compensation expense of $2.2 million;

• an increase in contracts receivable including retainage, net, of $33.0 million as a result of higher overall revenues due to acquisitions and growth in existing markets;

• an increase in other assets of $4.1 million primarily due to capitalized costs related to the amended revolving credit facility and deposits on property, plant and equipment assets;

• an increase in inventories of $8.1 million due to inventory acquired in acquisitions and normal fluctuations in our inventory cycle;

• an increase in accounts payable and accrued expenses and other current liabilities of $19.8 million due to increased construction activity;

• a net decrease of $10.0 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.

Investing Activities

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.

During the nine months ended June 30, 2022, cash used in investing activities was $158.6 million, of which $102.9 million related to acquisitions completed in the period, $52.2 million was invested in property, plant and equipment and $7.7 million was invested in restricted investments by the Captive, partially offset by $4.2 million of proceeds from the sale of equipment.

During the nine months ended June 30, 2021, cash used in investing activities was $129.5 million, of which $92.3 million related to acquisitions completed in the period and $39.6 million was invested in property, plant and equipment, partially offset by $2.4 million of proceeds from the sale of equipment.

Financing Activities

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 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.

During the nine months ended June 30, 2022, cash provided by financing activities was $137.3 million.

We received $142.3 million of proceeds from issuance of long-term debt, net of debt issuance costs and discounts, primarily used for acquisitions completed in the period.

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

During the nine months ended June 30, 2021, cash provided by financing activities was $106.3 million.

We received $199.1 million

from proceeds on long-term debt, net of debt issuance costs and discounts, reflecting a Term Loan advance, net of issuance costs, to

fund acquisitions and for liquidity purposes.

These proceeds were offset by $92.8 million of repayments of long-term debt.

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 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.

At June 30, 2022 and September 30, 2021, we had $250.0 million and $197.5 million, respectively, of principal outstanding under the Term Loan, $105.1 million and $20.0 million, respectively, of principal outstanding under the Revolving Credit Facility, and availability of $208.6 million and $193.7 million, respectively, under the Revolving Credit Facility, including reduction for outstanding letters of credit.

We also had availability of $50.0 million under the delayed draw term loan facility.

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 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.

At June 30, 2022 and September 30, 2021, our fixed charge coverage ratio was 2.20-to-1.00 and 3.29-to-1.00, respectively, and our consolidated leverage ratio was 2.99-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 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.

At June 30, 2022 and September 30, 2021, the aggregate notional value of these interest rate swap agreements was $192.2 million and $198.3 million, respectively, and the fair value was $12.6 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 six months ended March 31, 2022 and 2021, our capital expenditures were approximately $34.7 million and $26.9 million, respectively.

During the nine months ended June 30, 2022 and 2021, our capital expenditures were approximately $52.2 million and $39.6 million, respectively.

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

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

At June 30, 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 inflation and supply chain constraints, 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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Contractual Obligations

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

The following table summarizes our significant obligations outstanding as of June 30, 2022:

Payments Due by Fiscal Year

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Off-Balance Sheet Arrangements

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.

As of June 30, 2022, the Company had aggregate letters of credit outstanding in the amount of $11.3 million, future purchase commitments for diesel fuel and natural gas of $8.4 million and $2.7 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