Item 2. Management’s Discussion and Analysis
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
This discussion and analysis of our financial condition and results of operations is intended to assist in understanding and assessing the trends and significant changes in our results of operations and financial condition during the period covered by this report. Historical results may not be indicative of future performance. This discussion includes forward-looking statements that reflect our plans, estimates and beliefs. Such statements involve risks and uncertainties. Our actual results may differ materially from those contemplated by these forward-looking statements as a result of various factors, including those set forth under the headings “Risk Factors” and “Cautionary Statement Regarding Forward-Looking Statements.” This discussion should be read in conjunction with our unaudited consolidated financial statements and the notes thereto included elsewhere in this Quarterly Report on Form 10-Q and our audited consolidated financial statements and notes thereto included in the 2022 Form 10-K. In this discussion, we use certain non-GAAP financial measures. Explanations of these non-GAAP financial measures and reconciliations to the most directly comparable GAAP financial measures are included in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Investors should not consider non-GAAP financial measures in isolation or as substitutes for financial information presented in compliance with GAAP.
Overview
We are a civil infrastructure company that specializes in the building and maintenance of transportation networks. Our operations leverage a highly skilled workforce, strategically located HMA plants, substantial construction assets and select material deposits. We provide construction products and services to both public and private infrastructure projects, with an emphasis on highways, roads, bridges, airports and commercial and residential sites in the southeastern United States.
Our public projects are funded by federal, state and local governments and include projects for roads, highways, bridges, airports and other forms of infrastructure. Public transportation infrastructure projects historically have been a relatively stable portion of state and federal budgets and represent a significant share of the United States construction market. Federal funds are allocated on a state-by-state basis, and each state is required to match a portion of the federal funds that it receives. Federal highway spending uses funds predominantly from the Highway Trust Fund, which derives its revenues from fuel taxes and other user fees.
In addition to public infrastructure projects, we provide a wide range of large sitework construction and HMA paving services to private construction customers, including commercial and residential developers and local businesses.
Contract Backlog
At March 31, 2023, our contract backlog was $1.52 billion. Contract backlog is a financial measure that generally reflects the dollar value of work that the Company expects to perform in the future. We generally include a construction project in our contract backlog at the time it is awarded and to the extent we believe funding is probable. Our backlog generally consists of uncompleted work on contracts in progress and contracts for which we have executed a contract but have not commenced the work. For uncompleted work on contracts in progress, we include (i) executed change orders, (ii) pending change orders for which we expect to receive confirmation in the ordinary course of business and (iii) claims that we have made against our customers for which we have determined we have a legal basis under existing contractual arrangements and as to which we consider collection to be probable. Backlog of uncompleted work on contracts under which work was either in progress or had not yet begun was $1.25 billion at March 31, 2023. Our contract backlog also includes low bid/no contract jobs, which consist of (i) public bid jobs for which we were the low bidder and no contract has been executed and (ii) private work jobs for which we have been notified that we are the low bidder or have been given a notice to proceed, but no contract has been executed. Low bid/no contract backlog was $0.27 billion at March 31, 2023.
Recent Developments
Inflation and Supply Chain Constraints
During the three and six months ended March 31, 2023, we continued to experience an upward trend in several inflation-sensitive inputs that we use to provide our products and services, including upward pressure on wages and increases in the cost of certain raw materials used to produce HMA and other items that are critical to our business. In addition, we continued to experience 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. Although these issues have improved, intermittent stresses continued, particularly in regard to our older backlog. To date, we have been able to mitigate some of the effects of inflation, supply chain disruptions and labor constraints on our business by increasing prices for our products and including the anticipated cost increases in the construction projects on which we bid. 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.
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Tennessee and North Carolina Acquisitions
On November 18, 2022, we acquired three HMA manufacturing plants and certain related assets located in the Nashville, Tennessee metro area for $9.5 million. In connection with this transaction, we disposed of a quarry in North Carolina, resulting in total cash proceeds of $37.0 million and a gain on the facility exchange of $5.4 million. On December 1, 2022, we acquired all of the capital stock of Ferebee Corporation, an HMA manufacturing and paving company headquartered in Charlotte, North Carolina for $68.3 million. The transaction established our second platform company in North Carolina and added three HMA plants in the greater Charlotte/Rock Hill metro area. For further discussion regarding these transactions, see Note 4 - Business Acquisitions to the unaudited consolidated financial statements included elsewhere in this report.
Chief Financial Officer Appointment
Effective following the close of business on March 31, 2023, Gregory A. Hoffman was appointed as our Chief Financial Officer. Prior to his appointment, Mr. Hoffman served as our Senior Vice President of Finance from April 2021 until March 2023 and as Chief Financial Officer of Wiregrass Construction Company, our Alabama subsidiary, from 2009 to 2021. Before joining our Company, Mr. Hoffman served in various roles of increasing responsibility at Corporate Express, Inc., a Staples company, including as Division Controller and Vice President, Operations, and also as Division Controller for APAC-Georgia, Inc., a heavy civil infrastructure company. Prior to APAC, he was a Manager at Ernst & Young LLP, where he directed audit engagement teams serving a variety of industries, including construction. Hoffman holds a Bachelor of Science in Accounting from the University of Alabama.
How We Assess Performance of Our Business
Revenues
We derive our revenues predominantly by providing construction products and services for both public and private infrastructure projects, with an emphasis on highways, roads, bridges, airports and commercial and residential sites. Our projects represent a mix of federal, state, municipal and private customers. We also derive revenues from the sale of HMA, aggregates, and liquid asphalt cement to customers. We recognize revenues derived from projects as we satisfy our performance obligations over time (formerly known as the percentage-of-completion method), measured by the relationship of total cost incurred compared to total estimated contract costs (cost-to-cost input method). Changes in job performance, job conditions and estimated profitability, including those arising from contract penalty provisions and final contract settlements, may result in revisions to estimated costs and income, and are recognized in the period in which the revisions are determined. Revenues derived from the sale of HMA, aggregates, and liquid asphalt cement are recognized when the risks associated with ownership have passed to the customer.
Gross Profit
Gross profit represents revenues less cost of revenues. Cost of revenues consists of all direct and indirect costs associated with construction contracts, including raw materials, labor, equipment costs, depreciation, lease expenses, subcontract costs and other expenses at our HMA plants, aggregates mining facilities, and liquid asphalt cement terminal. Our cost of revenues is directly affected by fluctuations in commodity prices, primarily liquid asphalt and diesel fuel. From time to time, when appropriate, we limit our exposure to changes in commodity prices by entering into forward purchase commitments. In addition, our public infrastructure contracts often provide for price adjustments based on fluctuations in certain commodity-related product costs. 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, Accretion and Amortization
Property, plant and equipment are initially recorded at cost or, if acquired as a business combination, at fair value. Depreciation on property, plant and equipment is computed on a straight-line basis over the estimated useful life of the asset. Amortization expense is the periodic expense related to leasehold improvements and intangible assets. Leasehold improvements are amortized over the lesser of the life of the underlying asset or the remaining lease term. Our intangible assets were recognized as a result of certain acquisitions and are generally amortized on a straight-line basis over the estimated useful lives of the assets. Our unfavorable contract liabilities were recognized as a result of certain acquisitions and are amortized as the associated projects progress. Mineral reserves are depleted in accordance with the units-of-production method as aggregates are extracted, using the initial allocation of cost based on proven and probable reserves.
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General and Administrative Expenses
General and administrative expenses include costs related to our operational offices that are not allocated to direct contract costs and expenses related to our corporate offices. These expenses consist primarily of salaries and personnel costs for our administration, finance and accounting, legal, information systems, human resources and certain managerial employees. General and administrative expenses also include acquisition expenses, audit, consulting and professional fees, stock-based compensation expense, travel, insurance, office space rental costs, property taxes and other corporate and overhead expenses.
Gain on Sale of Property, Plant and Equipment
In the normal course of business, we sell assets for various reasons, including when the cost of maintaining the asset exceeds the cost of replacing it. The gain or loss on the sale of property, plant and equipment reflects the difference between the carrying value at the date of disposal and the net consideration received from the sale during the period.
Gain on Facility Exchange
As part of our continued growth strategy, we may exchange or sell other facilities in order to generate capital for use in connection with other strategic initiatives. The gain or loss on the exchange or sale of a facility reflects the difference between the net carrying value of the facility at the date of disposal and the consideration received from the exchange or sale during the period.
Interest Expense, Net
Interest expense, net primarily represents interest incurred on our long-term debt, such as the Term Loan and the Revolving Credit Facility, as well as the changes in fair values of interest swap agreements and amortization of deferred debt issuance costs. These amounts are partially offset by interest income earned on short-term investments of cash balances in excess of our current operating needs.
Other Key Performance Indicators - Adjusted EBITDA and Adjusted EBITDA Margin
Adjusted EBITDA represents net income (loss) before, as applicable from time to time, (i) interest expense, net, (ii) provision (benefit) for income taxes, (iii) depreciation, depletion, accretion and amortization, (iv) equity-based compensation expense, (v) loss on the extinguishment of debt, (vi) certain management fees and expenses and (vii) nonrecurring legal settlement costs and associated legal expenses unrelated to the Company’s core operations. Adjusted EBITDA Margin represents Adjusted EBITDA as a percentage of revenues for each period. These metrics are supplemental measures of our operating performance that are neither required by, nor presented in accordance with, GAAP. These measures have limitations as analytical tools and should not be considered in isolation or as an alternative to net income or any other performance measure derived in accordance with GAAP as an indicator of our operating performance. We present Adjusted EBITDA and Adjusted EBITDA Margin because management uses these measures as key performance indicators, and we believe that securities analysts, investors and others use these measures to evaluate companies in our industry. Our calculation of Adjusted EBITDA and Adjusted EBITDA Margin may not be comparable to similarly named measures reported by other companies. Potential differences may include differences in capital structures, tax positions and the age and book depreciation of intangible and tangible assets.
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The following table presents a reconciliation of net income (loss), 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,
2023 2022 2023 2022
Net loss $ (5,481) $ (9,418) $ (3,589) $ (3,907)
Interest expense, net 4,802 859 8,762 2,123
Provision for income taxes (1,474) (2,887) (964) (1,087)
Depreciation, depletion, accretion and amortization 19,858 17,144 38,233 33,047
Equity-based compensation expense 2,692 1,742 5,172 3,246
Management fees and expenses (1)
359 384 726 759
Adjusted EBITDA $ 20,756 $ 7,824 $ 48,340 $ 34,181
Revenues $ 324,850 $ 243,385 $ 666,629 $ 528,349
Adjusted EBITDA Margin 6.4 % 3.2 % 7.3 % 6.5 %
(1) Reflects fees and reimbursement of certain out-of-pocket expenses under a management services agreement with SunTx (see Note 12 - Related Parties to the unaudited consolidated financial statements included elsewhere in this report).
Results of Operations
Three Months Ended March 31, 2023 Compared to Three Months Ended March 31, 2022
The following table sets forth selected financial data for the three months ended March 31, 2023 and 2022 (unaudited in thousands, except percentages):
Change From the Three Months Ended
For the Three Months Ended March 31, March 31, 2022
to the Three Months Ended
2023 2022 March 31, 2023
Dollars % of
Revenues Dollars % of
Revenues $
Change %
Change
Revenues $ 324,850 100.0 % $ 243,385 100.0 % $ 81,465 33.5 %
Cost of revenues 298,570 91.9 % 230,888 94.9 % 67,682 29.3 %
Gross profit 26,280 8.1 % 12,497 5.1 % 13,783 110.3 %
General and administrative expenses (31,989) (9.9) % (25,000) (10.3) % (6,989) 28.0 %
Gain on sale of property, plant and equipment 3,158 1.0 % 1,014 0.4 % 2,144 211.4 %
Gain on facility exchange — — % — — % — — %
Operating loss (2,551) (0.8) % (11,489) (4.7) % 8,938 (77.8) %
Interest expense, net (4,802) (1.5) % (859) (0.4) % (3,943) 459.0 %
Other income 398 0.1 % 43 — % 355 825.6 %
Loss before provision for income taxes (6,955) (2.2) % (12,305) (5.1) % 5,350 (43.5) %
Provision for income taxes (1,474) (0.5) % (2,887) (1.2) % 1,413 (48.9) %
Net loss $ (5,481) (1.7) % $ (9,418) (3.9) % $ 3,937 (41.8) %
Adjusted EBITDA $ 20,756 6.4 % $ 7,824 3.2 % $ 12,932 165.3 %
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Revenues. Revenues for the three months ended March 31, 2023 increased $81.5 million, or 33.5%, to $324.9 million from $243.4 million for the three months ended March 31, 2022. The increase included $40.0 million of revenues attributable to acquisitions completed subsequent to March 31, 2022 and $41.5 million of revenues in our existing markets from contract work and sales of HMA and aggregates to third parties. The 17.1% increase in revenues in our existing markets compared to the prior year period was due to strong demand in both public and private work.
Gross Profit. Gross profit for the three months ended March 31, 2023 increased $13.8 million, or 110.3%, to $26.3 million from $12.5 million for the three months ended March 31, 2022. The increase in gross profit was primarily the result of a 33.5% increase in revenues for the three months ended March 31, 2023 compared to the three months ended March 31, 2022. The higher gross profit margin was due to (i) efficient utilization of our plants and equipment fleet, (ii) lower energy costs for diesel fuel, liquid asphalt and other petroleum-based resources and (iii) completion of new backlog with more favorable margins.
General and Administrative Expenses. General and administrative expenses for the three months ended March 31, 2023 increased $7.0 million, or 28.0%, to $32.0 million from $25.0 million for the three months ended March 31, 2022. The increase was primarily the result of (i) a $1.0 million increase in equity-based compensation expense, (ii) a $1.7 million increase attributable to general and administrative expenses associated with the businesses acquired subsequent to March 31, 2022, and (iii) a $5.2 million increase in management personnel payroll and benefits.
Gain on Sale of Property, Plant and Equipment . Gain on sale of property, plant and equipment for the three months ended March 31, 2023 increased $2.1 million, or 211.4%, to $3.2 million from $1.0 million for the three months ended March 31, 2022. The increase was primarily the result of $1.3 million gain on the sale of an excess office building in North Carolina that was no longer needed in our operations and additional sales of equipment and components during the three months ended March 31, 2023.
Interest Expense, Net. Interest expense, net for the three months ended March 31, 2023 increased $3.9 million, or 459.0%, to $4.8 million compared to $0.9 million for the three months ended March 31, 2022. The increase in interest expense was due to a $118.5 million increase in the average principal debt balance outstanding and higher interest rates during the three months ended March 31, 2023 compared to the corresponding period in 2022.
Provision for Income Taxes. Our effective tax rate decreased to 21.1% for the three months ended March 31, 2023, from 23.5% for the three months ended March 31, 2022. Our lower effective tax rate during the three months ended March 31, 2023 was due to differences in state tax rates at our operating subsidiaries.
Net Loss. Net loss decreased $3.9 million to a net loss of $5.5 million for the three months ended March 31, 2023, compared to net loss of $9.4 million for the three months ended March 31, 2022. The decrease in net loss was primarily a result of higher gross profit and gain on sale of property, plant and equipment, 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 $20.8 million and 6.4%, respectively, for the three months ended March 31, 2023, compared to $7.8 million and 3.2%, respectively, for the three months ended March 31, 2022. The increase in Adjusted EBITDA and Adjusted EBITDA Margin primarily resulted from an increase in gross profit and depreciation, depletion, accretion and amortization, partially offset by higher general and administrative expenses and interest expense, net, all as described above. See the description of Adjusted EBITDA and Adjusted EBITDA Margin, as well as a reconciliation of Adjusted EBITDA to net loss and the calculation of Adjusted EBITDA Margin, under the heading “How We Assess Performance of Our Business” above.
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Six Months Ended March 31, 2023 Compared to Six Months Ended March 31, 2022
The following table sets forth selected financial data for the six months ended March 31, 2023 and 2022 (unaudited in thousands, except percentages):
Change From the Six Months Ended
For the Six Months Ended March 31, March 31, 2022
to the Six Months Ended
2023 2022 March 31, 2023
Dollars % of
Revenues Dollars % of
Revenues $
Change %
Change
Revenues $ 666,629 100.0 % $ 528,349 100.0 % $ 138,280 26.2 %
Cost of revenues 609,853 91.5 % 482,888 91.4 % 126,965 26.3 %
Gross profit 56,776 8.5 % 45,461 8.6 % 11,315 24.9 %
General and administrative expenses (61,714) (9.2) % (49,946) (9.5) % (11,768) 23.6 %
Gain on sale of property, plant and equipment 3,326 0.5 % 1,455 0.3 % 1,871 128.6 %
Gain on facility exchange 5,389 0.8 % — — % 5,389 — %
Operating income (loss) 3,777 0.6 % (3,030) (0.6) % 6,807 (224.7) %
Interest expense, net (8,762) (1.3) % (2,123) (0.4) % (6,639) 312.7 %
Other income 432 — % 159 0.1 % 273 171.7 %
Loss before provision for income taxes (4,553) (0.7) % (4,994) (0.9) % 441 (8.8) %
Provision for income taxes (964) (0.1) % (1,087) (0.2) % 123 (11.3) %
Net loss $ (3,589) (0.6) % $ (3,907) (0.7) % $ 318 (8.1) %
Adjusted EBITDA $ 48,340 7.3 % $ 34,181 6.5 % $ 14,159 41.4 %
Revenues. Revenues for the six months ended March 31, 2023 increased $138.3 million, or 26.2%, to $666.6 million from $528.3 million for the six months ended March 31, 2022. The increase included $72.2 million of revenues attributable to acquisitions completed subsequent to March 31, 2022 and $66.1 million of revenues in our existing markets from contract work and sales of HMA and aggregates to third parties. The 12.5% increase in revenues in our existing markets compared to the prior year period was due to strong demand in both public and private work.
Gross Profit. Gross profit for the six months ended March 31, 2023 increased $11.3 million, or 24.9%, to $56.8 million from $45.5 million for the six months ended March 31, 2022. The increase in gross profit was primarily the result of a 26.2% increase in revenues for the six months ended March 31, 2023 compared to the six months ended March 31, 2022. The lower gross profit margin was due to headwinds from inflation and supply chain constraints on our older backlog primarily completed in the three months ended December 31, 2022, partially offset by more favorable conditions for the three months ended March 31, 2023, as noted above.
General and Administrative Expenses. General and administrative expenses for the six months ended March 31, 2023 increased $11.8 million, or 23.6%, to $61.7 million from $49.9 million for the six months ended March 31, 2022. The increase was primarily the result of (i) a $2.0 million increase in equity-based compensation expense, (ii) a $2.7 million increase attributable to general and administrative expenses associated with the businesses acquired subsequent to March 31, 2022, and (iii) a $7.7 million increase in management personnel payroll and benefits.
Gain on Sale of Property, Plant and Equipment . Gain on sale of property, plant and equipment for the six months ended March 31, 2023 increased $1.9 million, or 128.6%, to $3.3 million from $1.5 million for the six months ended March 31, 2022. The increase was primarily the result of $1.3 million gain on the sale of an excess office building in North Carolina that was no longer needed in our operations and additional sales of equipment and components during the three months ended March 31, 2023.
Gain on Facility Exchange . Gain on facility exchange for the six months ended March 31, 2023 was $5.4 million compared to $0.0 million for the six months ended March 31, 2022. The gain was the result of the disposition of a quarry in North Carolina. In connection with this transaction, the Company acquired three HMA manufacturing plants and certain related assets located in the Nashville, Tennessee metro area.
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Interest Expense, Net. Interest expense, net for the six months ended March 31, 2023 increased $6.6 million, or 312.7%, to $8.8 million compared to $2.1 million for the six months ended March 31, 2022. The increase in interest expense was due to a $127.4 million increase in the average principal debt balance outstanding and higher interest rates during the six months ended March 31, 2023 compared to the corresponding period in 2022.
Provision for Income Taxes. Our effective tax rate decreased to 21.1% for the six months ended March 31, 2023, from 21.8% for the six months ended March 31, 2022. Our lower effective tax rate during the six months ended March 31, 2023 was due to differences in state tax rates at our operating subsidiaries.
Net Loss. Net loss decreased $0.3 million to a net loss of $3.6 million for the six months ended March 31, 2023, compared to net loss of $3.9 million for the six months ended March 31, 2022. The decrease in net loss was primarily a result of higher gross profit, gain on sale of property, plant and equipment and gain on facility exchange, 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 $48.3 million and 7.3%, respectively, for the six months ended March 31, 2023, compared to $34.2 million and 6.5%, respectively, for the six months ended March 31, 2022. The increase in Adjusted EBITDA and Adjusted EBITDA Margin primarily resulted from an increase in gross profit, gain on facility exchange and depreciation, depletion, accretion and amortization, partially offset by higher general and administrative expenses and interest expense, net, all as described above. See the description of Adjusted EBITDA and Adjusted EBITDA Margin, as well as a reconciliation of Adjusted EBITDA to net loss and the calculation of Adjusted EBITDA Margin, under the heading “How We Assess Performance of Our Business” above.
Liquidity and Capital Resources
Cash Flows Analysis
The following table sets forth our cash flows for the periods indicated (unaudited, in thousands):
For the Six Months Ended March 31,
2023 2022
Net cash provided by operating activities, net of acquisition $ 45,696 $ 3,294
Net cash used in investing activities (97,235) (140,177)
Net cash provided by financing activities 46,611 110,961
Net change in cash and cash equivalents $ (4,928) $ (25,922)
Operating Activities
During the six months ended March 31, 2023, cash provided by operating activities, net of acquisitions, was $45.7 million, primarily as a result of:
• net loss of $3.6 million, including $38.2 million of depreciation, depletion, accretion and amortization of long-lived assets, unrealized losses on derivative instruments of $2.3 million, gain on sale of facility exchange of $5.4 million and equity-based compensation expense of $5.2 million;
• a decrease in contracts receivable including retainage, net of $34.1 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 $3.2 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 $10.2 million due to increased inventories from acquisitions, growth in existing markets, higher inventory costs and normal fluctuations in our inventory cycle;
• a decrease in accounts payable and accrued expenses and other current liabilities of $19.1 million due to the timing of processing transactions in our accounts payable cycle; and
• a net increase of $8.2 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.
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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; and
• 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.
Investing Activities
During the six months ended March 31, 2023, cash used in investing activities was $97.2 million, of which $77.8 million related to acquisitions completed in the period, $60.4 million was invested in property, plant and equipment and $5.1 million was invested in restricted investments by the Captive, partially offset by $8.3 million of proceeds from the sale of property, plant and equipment and $37.0 million of proceeds from the facility exchange.
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 property, plant and equipment.
Financing Activities
During the six months ended March 31, 2023, cash provided by financing activities was $46.6 million. We received $53.0 million of proceeds from our Credit Facility, which were primarily used for acquisitions completed in the period. This cash flow was partially offset by $6.3 million of principal payments on long-term debt.
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, which were primarily used for acquisitions completed in the period. This cash flow was partially offset by $5.0 million of principal payments on 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, 2023 and September 30, 2022, there was $280.6 million and $271.9 million, respectively, of principal outstanding under the Term Loan, $143.1 million and $105.1 million, respectively, of principal outstanding under the Revolving Credit Facility, and availability of $171.9 million and $208.6 million, respectively, under the Revolving Credit Facility, including a reduction for outstanding letters of credit. The Company also had $10.0 million available under the Delayed Draw Term Loan at March 31, 2023 and September 30, 2022.
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 3.50-to-1.00, subject to certain adjustments. At March 31, 2023 and September 30, 2022, our fixed charge coverage ratio was 1.47-to-1.00 and 2.56-to-1.00, respectively, and our consolidated leverage ratio was 2.92-to-1.00 and 2.79-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, 2023 and September 30, 2022, the aggregate notional value of the interest rate swap agreement was $300.0 million, and the fair value was $18.9 million and $24.7 million, respectively, which amounts are included within other assets on the Company’s Consolidated Balance Sheets.
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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, 2023 and 2022, our capital expenditures were approximately $60.4 million and $34.7 million, respectively. Our capital expenditures are typically made during the fiscal year in which they are approved. At March 31, 2023, our commitments for capital expenditures were not material to our financial condition or results of operations on a consolidated basis. For fiscal 2023, we expect total capital expenditures to be $85.0 million to $90.0 million. Our capital expenditure budget is an estimate and is subject to change.
Historically, we have required significant amounts of cash in order to make capital expenditures, purchase materials and fund our organic expansion into new markets. Our working capital needs are driven by the seasonality and growth of our business, with our cash requirements increasing in periods of growth. Additional cash requirements resulting from our growth include the costs of additional personnel, production and distribution facilities, enhancements to our information systems, integration costs related to any acquisitions and our compliance with laws and rules applicable to public companies.
We have historically relied on cash available through credit facilities, in addition to cash from operations, to finance our working capital requirements and to support our growth. We regularly monitor potential capital sources, including equity and debt markets, in an effort to meet our planned capital expenditures and liquidity requirements. Our future success will depend on our ability to access outside sources of capital.
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. There can be no assurance that operations and other capital resources will provide sufficient cash to maintain planned or future levels of capital expenditures. In the event that we make one or more acquisitions and the amount of capital required is greater than the amount of cash on hand we have available for acquisitions at that time, we could be required to reduce the expected level of capital expenditures and/or seek additional capital. 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, 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. 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 March 31, 2023 (unaudited, in thousands):
Payments Due by Fiscal Year
Total 2023 2024 2025 2026 2027 2028 and Thereafter
Debt obligations $ 423,725 $ 6,250 $ 14,500 $ 18,125 $ 21,750 $ 363,100 $ —
Operating leases 20,956 1,430 2,560 2,197 2,143 2,015 10,611
Purchase commitments 4,658 2,509 1,893 256 — — —
Royalty payments 2,485 65 246 207 182 170 1,615
Asset retirement obligations 2,387 — — — — — 2,387
Total $ 454,211 $ 10,254 $ 19,199 $ 20,785 $ 24,075 $ 365,285 $ 14,613
Off-Balance Sheet Arrangements
As of March 31, 2023, we had aggregate letters of credit outstanding in the amount of $10.0 million, future purchase commitments of diesel fuel and natural gas of $4.4 million and $0.3 million, respectively, and $2.5 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. See Note 17 - Commitments to our unaudited consolidated financial statements included elsewhere in this report for additional information.
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