What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-02-09 compared with 2023-08-08 · 72 added, 122 removed, 139 unchanged (58% of the section changed)

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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.

Our public projects are funded by federal, state and local governments and include 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.

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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.

In addition to public infrastructure projects, we provide a wide range of large site work construction and HMA paving services to private construction customers, including commercial and residential developers and local businesses.

Contract Backlog

At June 30, 2023, our contract backlog was $1.59 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.

At December 31, 2023, our contract backlog was $1.6 billion.

Contract backlog is a financial measure that reflects the dollar value of work that the Company expects to perform in the future.

We 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 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 $1.23 billion at June 30, 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 $0.36 billion at June 30, 2023.

Backlog of uncompleted work on contracts under which work was either in progress or had not yet begun was $1.3 billion at December 31, 2023.

Our contract backlog also includes low bid/no contract projects, which consist of (i) public bid projects for which we were the low bidder and no contract has been executed and (ii) private work projects 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 $0.3 billion at December 31, 2023.

Recent Developments

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 $67.3 million.

The transaction established our second platform company in North Carolina and added three HMA plants in the greater Charlotte/Rock Hill metro area.

On April 3, 2023, we acquired substantially all the assets of Pickens Construction, Inc., an asphalt paving company headquartered in Anderson, South Carolina, for $5.0 million.

The transaction added an HMA plant in the greater Greenville, South Carolina metro area.

On May 1, 2023, we acquired the Huntsville, Alabama operations of Southern Site Contractors, LLC, an excavation, grading and utility contractor, for $1.1 million.

The transaction enhanced our vertical integration of construction services in the greater Huntsville, Alabama metro area.

Business Acquisitions

During the thee months ended December 31, 2023, we completed three acquisitions across three states, adding to or expanding our operations in Alabama, North Carolina and South Carolina.

As a result of these acquisitions, we added five asphalt plants and a diverse fleet of equipment and vehicles, as well as skilled construction professionals.

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

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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).

We recognize revenues derived from projects as we satisfy our performance obligations over time, 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.

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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.

General and administrative expenses also include acquisition expenses, audit, consulting and professional fees, share-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

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Other Key Performance Indicators - Adjusted EBITDA and Adjusted EBITDA Margin

Adjusted EBITDA represents net income 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 and (vi) certain management fees and expenses.

Adjusted EBITDA represents net income before, as applicable from time to time, (i) interest expense, net, (ii) provision (benefit) for income taxes, (iii) depreciation, depletion, accretion and amortization, (iv) share-based compensation expense, and (v) loss on the extinguishment of debt.

Adjusted EBITDA Margin represents Adjusted EBITDA as a percentage of revenues for each period.

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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 June 30, For the Nine Months Ended June 30,

For the Three Months Ended December 31,

2023 2022 (1)

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Depreciation, depletion, accretion and amortization 21,121 18,375

Equity-based compensation expense 2,737 1,848 7,909 5,094

Management fees and expenses (1)

383 370 1,109 1,129

Share-based compensation expense 3,046 2,480

Adjusted EBITDA $ 40,874 $ 27,217

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Adjusted EBITDA Margin 10.3 % 8.0 %

(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).

(1) The Company has historically included within the definition of Adjusted EBITDA an adjustment for management fees and expenses related to the Company’s management services agreement with an affiliate of SunTx Capital Partners, a member of the Company’s control group.

Effective October 1, 2023, the term of the management services agreement was extended to October 1, 2028.

As a result of the term extension, the Company no longer views the management fees and expenses paid under the management services agreement as a non-recurring expense.

Accordingly, periods commencing subsequent to September 30, 2023 do not include an adjustment for management fees and expenses, and the Company has recast comparative Adjusted EBITDA and Adjusted EBITDA Margin for the three months ended December 31, 2022 to conform to the current definition.

Results of Operations

Three Months Ended June 30, 2023 Compared to Three Months Ended June 30, 2022

The following table sets forth selected financial data for the three months ended June 30, 2023 and 2022 (unaudited in thousands, except percentages):

Three Months Ended December 31, 2023 Compared to Three Months Ended December 31, 2022

The following table sets forth selected financial data for the three months ended December 31, 2023 and 2022 (unaudited in thousands, except percentages):

Change From the Three Months Ended

For the Three Months Ended June 30, June 30, 2022

For the Three Months Ended December 31, December 31, 2022

to the Three Months Ended

2023 2022 June 30, 2023

Revenues Dollars % of

Revenues $ 421,893 100.0 % $ 380,272 100.0 % $ 41,621 10.9 %

Cost of revenues 357,821 84.8 % 336,022 88.4 % 21,799 6.5 %

Gross profit 64,072 15.2 % 44,250 11.6 % 19,822 44.8 %

General and administrative expenses (32,231) (7.7) % (26,584) (7.0) % (5,647) 21.2 %

Gain on sale of property, plant and equipment 1,499 0.4 % 333 0.1 % 1,166 350.2 %

Gain on facility exchange — — % — — % — — %

Operating income 33,340 7.9 % 17,999 4.7 % 15,341 85.2 %

Interest expense, net (5,039) (1.2) % (2,054) (0.5) % (2,985) 145.3 %

Other income 493 0.1 % 178 — % 315 177.0 %

Income before provision for income taxes 28,794 6.8 % 16,123 4.2 % 12,671 78.6 %

Provision for income taxes 7,117 1.7 % 3,955 1.0 % 3,162 79.9 %

Net income $ 21,677 5.1 % $ 12,168 3.2 % $ 9,509 78.1 %

Adjusted EBITDA $ 56,489 13.4 % $ 37,639 9.9 % $ 18,850 50.1 %

Revenues for the three months ended June 30, 2023 increased $41.6 million, or 10.9%, to $421.9 million from $380.3 million for the three months ended June 30, 2022.

The increase included $41.4 million of revenues attributable to acquisitions completed subsequent to June 30, 2022.

Gross Profit.

Gross profit for the three months ended June 30, 2023 increased $19.8 million, or 44.8%, to $64.1 million from $44.3 million for the three months ended June 30, 2022.

The increase in gross profit was the result of a 10.9% increase in revenues for the three months ended June 30, 2023 compared to the three months ended June 30, 2022 and a higher gross profit margin.

The higher gross profit margin was due to (i) efficient utilization of our plants and equipment fleet and (ii) completion of new backlog with more favorable margins.

General and Administrative Expenses.

General and administrative expenses for the three months ended June 30, 2023 increased $5.6 million, or 21.2%, to $32.2 million from $26.6 million for the three months ended June 30, 2022.

The increase was the result of (i) a $0.9 million increase in equity-based compensation expense, (ii) a $2.2 million increase attributable to general and administrative expenses associated with the businesses acquired subsequent to June 30, 2022, and (iii) a $3.3 million increase in management personnel payroll and benefits, partially offset by a $0.8 million decrease in other general and adminstrative expenses.

Gain on Sale of Property, Plant and Equipment .

Gain on sale of property, plant and equipment for the three months ended June 30, 2023 increased $1.2 million, or 350.2%, to $1.5 million from $0.3 million for the three months ended June 30, 2022.

The increase was primarily the result of higher levels of sales of equipment and components during the three months ended June 30, 2023.

Interest Expense, Net.

Interest expense, net for the three months ended June 30, 2023 increased $2.9 million, or 145.3%, to $5.0 million compared to $2.1 million for the three months ended June 30, 2022.

The increase in interest expense was due to a $80.4 million increase in the average principal debt balance outstanding and higher interest rates during the three months ended June 30, 2023 compared to the corresponding period in 2022.

Provision for Income Taxes.

Our effective tax rate increased to 24.7% for the three months ended June 30, 2023, from 24.5% for the three months ended June 30, 2022.

Our higher effective tax rate during the three months ended June 30, 2023 was due to differences in state tax rates at our operating subsidiaries.

Net income increased $9.5 million to $21.7 million for the three months ended June 30, 2023, compared to $12.2 million for the three months ended June 30, 2022.

The increase in net income was primarily a result of higher 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 $56.5 million and 13.4%, respectively, for the three months ended June 30, 2023, compared to $37.6 million and 9.9%, respectively, for the three months ended June 30, 2022.

The increase in Adjusted EBITDA and Adjusted EBITDA Margin resulted from an increase in gross profit, gain on sale of property, plant and equipment, and depreciation, depletion, accretion and amortization, partially offset by higher general and administrative expenses, 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 and the calculation of Adjusted EBITDA Margin, under the heading “How We Assess Performance of Our Business” above.

Nine Months Ended June 30, 2023 Compared to Nine Months Ended June 30, 2022

The following table sets forth selected financial data for the nine months ended June 30, 2023 and 2022 (unaudited in thousands, except percentages):

Change From the Nine Months Ended

For the Nine Months Ended June 30, June 30, 2022

to the Nine Months Ended

2023 2022 June 30, 2023

2023 2022 December 31, 2023

Revenues Dollars % of

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Interest expense, net (3,746) (0.9) % (3,960) (1.2) % 214 (5.4) %

Other income 925 0.1 % 337 0.1 % 588 174.5 %

Other income (expense) (28) — % 34 — % (62) (182.4) %

Income before provision for income taxes 12,961 3.3 % 2,402 0.7 % 10,559 439.6 %

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Adjusted EBITDA $ 40,874 10.3 % $ 27,217 8.0 % $ 13,657 50.2 %

Revenues for the nine months ended June 30, 2023 increased $179.9 million, or 19.8%, to $1.1 billion from $908.6 million for the nine months ended June 30, 2022.

The increase included $91.0 million of revenues attributable to acquisitions completed subsequent to June 30, 2022 and $88.9 million of revenues in our existing markets from contract work and sales of HMA and aggregates to third parties.

The 9.8% increase in revenues in our existing markets compared to the prior year period was due to strong demand in both public and private work.

Revenues for the three months ended December 31, 2023 increased $54.7 million, or 16.0%, to $396.5 million from $341.8 million for the three months ended December 31, 2022.

The increase included $29.6 million of revenues attributable to acquisitions completed during or subsequent to the three months ended December 31, 2022 and an increase of approximately $25.1 million of revenues in our existing markets from contract work and sales of HMA and aggregates to third parties.

The 7.3% increase in revenue in our existing markets was due to strong demand in both public and private work.

Gross Profit.

Gross profit for the nine months ended June 30, 2023 increased $31.1 million, or 34.7%, to $120.8 million from $89.7 million for the nine months ended June 30, 2022.

The increase in gross profit was the result of a 19.8% increase in revenues for the nine months ended June 30, 2023 compared to the nine months ended June 30, 2022 and a higher gross profit margin.

Gross profit for the three months ended December 31, 2023 increased $21.4 million, or 70.1%, to $51.9 million from $30.5 million for the three months ended December 31, 2022.

The increase in gross profit was primarily the result of the 16.0% increase in revenues for the three months ended December 31, 2023 compared to the three months ended December 31, 2022 and a higher gross profit margin.

The higher gross profit margin was due to (i) efficient utilization of our plants and equipment fleet and (ii) completion of new backlog with more favorable margins.

General and Administrative Expenses.

General and administrative expenses for the nine months ended June 30, 2023 increased $17.4 million, or 22.8%, to $93.9 million from $76.5 million for the nine months ended June 30, 2022.

The increase was the result of (i) a $2.8 million increase in equity-based compensation expense, (ii) a $4.9 million increase attributable to general and administrative expenses associated with the businesses acquired subsequent to June 30, 2022, and (iii) a $10.8 million increase in management personnel payroll and benefits, partially offset by a $1.1 million decrease in other general and administrative expenses.

General and administrative expenses for the three months ended December 31, 2023 increased $6.3 million, or 21.0%, to $36.0 million from $29.7 million for the three months ended December 31, 2022.

The increase was the result of (i) a $0.5 million increase in share-based compensation expense, (ii) a $2.0 million increase attributable to general and administrative expenses associated with the operations of businesses acquired subsequent to December 31, 2022, (iii) a $1.9 million increase in management personnel payroll and benefits, and (iv) a $1.8 million increase in other general and administrative expenses.

Gain on Sale of Property, Plant and Equipment.

Gain on sale of property, plant and equipment for the nine months ended June 30, 2023 increased $3.0 million, or 169.9%, to $4.8 million from $1.8 million for the nine months ended June 30, 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 higher levels of equipment and components during the nine months ended June 30, 2023.

Gain on sale of property, plant and equipment for the three months ended December 31, 2023 increased $0.6 million, or 397.6%, to $0.8 million from $0.2 million for the three months ended December 31, 2022.

The increase is attributable to higher disposals of equipment and components during the quarter.

Gain on Facility Exchange .

Gain on facility exchange for the nine months ended June 30, 2023 was $5.4 million compared to $0.0 million for the nine months ended June 30, 2022.

The gain was the result of the disposition of a quarry in North Carolina.

Gain on facility exchange for the three months ended December 31, 2023 was $0.0 million compared to $5.4 million for the three months ended December 31, 2021.

The gain was the result of the disposition of a quarry located near Goldston, 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.

Interest Expense, Net.

Interest expense, net for the nine months ended June 30, 2023 increased $9.6 million, or 230.4%, to $13.8 million compared to $4.2 million for the nine months ended June 30, 2022.

The increase in interest expense was due to a $112.5 million increase in the average principal debt balance outstanding and higher interest rates during the nine months ended June 30, 2023 compared to the corresponding period in 2022.

Interest expense, net for the three months ended December 31, 2023 decreased $0.3 million, or 5.4%, to $3.7 million compared to $4.0 million for the three months ended December 31, 2022.

The decrease in interest expense, net was primarily due to an increase in interest income from an overnight sweep program established during the three months ended December 31, 2023.

This was partially offset by an increase in interest expense due to an increase in the average principal debt balance outstanding during the three months ended December 31, 2023 compared to the three months ended December 31, 2022.

Provision for Income Taxes.

Our effective tax rate decreased to 25.4% for the nine months ended June 30, 2023, from 25.8% for the nine months ended June 30, 2022.

Our lower effective tax rate during the nine months ended June 30, 2023 was due to differences in state tax rates at our operating subsidiaries.

Net income increased $9.8 million to $18.1 million for the nine months ended June 30, 2023, compared to $8.3 million for the nine months ended June 30, 2022.

The increase in net income 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.

Our effective tax rate increased to 24.1% for the three months ended December 31, 2023, from 21.2% for the three months ended December 31, 2022.

Our higher effective tax rate during the three months ended December 31, 2023 was due to differences in state tax rates at our operating subsidiaries.

Net income increased $7.9 million, or 420.2%, to $9.8 million for the three months ended December 31, 2023, compared to $1.9 million for the three months ended December 31, 2022.

The increase in net income 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 decreased gain on facility exchange, all as described above.

Adjusted EBITDA and Adjusted EBITDA Margin.

Adjusted EBITDA and Adjusted EBITDA Margin were $104.8 million and 9.6%, respectively, for the nine months ended June 30, 2023, compared to $71.8 million and 7.9%, respectively, for the nine months ended June 30, 2022.

The increase in Adjusted EBITDA and Adjusted EBITDA Margin resulted from an increase in gross profit, gains on sale of property, plant and equipment, gain on facility exchange and depreciation, depletion, accretion and amortization, partially offset by higher general and administrative expenses, 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.

Adjusted EBITDA and Adjusted EBITDA Margin were $40.9 million and 10.3%, respectively, for the three months ended December 31, 2023, compared to $27.2 million and 8.0%, respectively, for the three months ended December 31, 2022.

The increase in Adjusted EBITDA and Adjusted EBITDA Margin resulted from an increase in gross profit and gain on sale of property, plant and equipment, partially offset by higher general and administrative expenses and decreased gain on facility exchange, 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”.

Liquidity and Capital Resources

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

For the Nine Months Ended June 30,

Net cash provided by operating activities, net of acquisition $ 94,542 $ (9,721)

For the Three Months Ended December 31,

Net cash provided by operating activities, net of acquisitions $ 60,378 $ 28,884

Net cash used in investing activities (104,661) (70,670)

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Operating Activities

During the nine months ended June 30, 2023, cash provided by operating activities, net of acquisitions, was $94.5 million, primarily as a result of:

• net income of $18.1 million, including $57.8 million of depreciation, depletion, accretion and amortization of long-lived assets, unrealized losses on derivative instruments of $1.4 million, gain on sale of property, plant and equipment of $4.8 million, gain on sale of facility exchange of $5.4 million and equity-based compensation expense of $7.9 million;

During the three months ended December 31, 2023, cash provided by operating activities, net of acquisitions, was $60.4 million, primarily as a result of:

• net income of $9.8 million, including $21.1 million of depreciation, depletion, accretion and amortization and $2.9 million of share-based compensation expense, gain on sale of property, plant and equipment of $0.8 million;

• a decrease in contracts receivable including retainage, net of $63.5 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 the timing of payments under our insurance policies and other expenses;

• an increase in inventories of $9.9 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 $34.7 million due to the timing of processing transactions in our accounts payable cycle;

• a net increase of $10.6 million in the difference between billings in excess of costs and estimated earnings on uncompleted contracts and costs and estimated earnings in excess of billings on uncompleted contracts and due to the timing of performing and closing projects.

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 $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.

• 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 $6.4 million due to the timing of performing and closing projects.

During the three months ended December 31, 2022, cash provided by operating activities, net of acquisitions, was $28.9 million, primarily as a result of:

• net income of $1.9 million, including $18.4 million of depreciation, depletion, accretion and amortization and $2.5 million of share-based compensation expense;

• a decrease in contracts receivable including retainage, net of $47.1 million due to normal fluctuations resulting from the timing of processing transactions in our accounts receivable cycle;

• an increase in inventories of $3.5 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 $33.2 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 $0.2 million due to the timing of performing and closing projects.

Investing Activities

During the nine months ended June 30, 2023, cash used in investing activities was $118.6 million, of which $82.7 million related to acquisitions completed in the period, $79.0 million was invested in property, plant and equipment and $7.9 million was invested in restricted investments by the Captive, partially offset by $12.6 million of proceeds from the sale of property, plant and equipment, $37.0 million of proceeds from the facility exchange and $1.4 million of proceeds from the sale of restricted investments.

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 three months ended December 31, 2023, cash used in investing activities was $104.7 million, of which $81.4 million related to acquisitions completed in the period and $26.8 million was invested in property, plant and equipment, partially offset by $2.5 million of proceeds from the sale of property, plant and equipment and $1.0 million of proceeds from the sale of restricted investments.

During the three months ended December 31, 2022, cash used in investing activities was $70.7 million, of which $77.2 million related to acquisitions completed in the period and $31.7 million was invested in property, plant and equipment, partially offset by $1.6 million of proceeds from the sale of property, plant and equipment and $36.4 million of proceeds from the facility exchange.

Financing Activities

During the nine months ended June 30, 2023, cash provided by financing activities was $43.5 million.

We received $53.0 million of proceeds from our Credit Facility, which were primarily used for acquisitions completed in the period.

During the three months ended December 31, 2023, cash provided by financing activities was $64.9 million.

We received $90.0 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 $23.8 million of principal payments on long-term debt and purchase of treasury stock of $1.3 million.

During the three months ended December 31, 2022, cash provided by financing activities was $49.7 million.

We received $53.0 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 $3.1 million of principal payments on long-term debt.

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.

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 June 30, 2023 and September 30, 2022, there was $277.5 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 June 30, 2023 and September 30, 2022.

At December 31, 2023 and September 30, 2023, we had $280.0 million and $283.8 million, respectively, of principal outstanding under the Term Loan, $163.1 million and $93.1 million, respectively, of principal outstanding under the Revolving Credit Facility, and availability of $153.6 million and $221.1 million, respectively, under the Revolving Credit Facility, including reduction for outstanding letters of credit.

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 June 30, 2023 and September 30, 2022, our fixed charge coverage ratio was 2.00-to-1.00 and 2.56-to-1.00, respectively, and our consolidated leverage ratio was 2.27-to-1.00 and 2.79-to-1.00, respectively.

At December 31, 2023 and September 30, 2023, our fixed charge coverage ratio was 3.35-to-1.00 and 2.56-to-1.00, respectively, and our consolidated leverage ratio was 1.78-to-1.00 and 1.72-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 June 30, 2023 and September 30, 2022, the aggregate notional value of the interest rate swap agreement was $300.0 million, and the fair value was $24.5 million and $24.7 million, respectively, which amounts are included within other assets on the Company’s Consolidated Balance Sheets.

At December 31, 2023 and September 30, 2023, the aggregate notional value of the interest rate swap agreement was $300.0 million, and the fair value was $17.6 million and $26.9 million, respectively, which amounts are included within other assets 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 nine months ended June 30, 2023 and 2022, our capital expenditures were approximately $79.0 million and $52.2 million, respectively.

During the three months ended December 31, 2023 and 2022, our capital expenditures were approximately $26.8 million and $31.7 million, respectively.

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

At June 30, 2023, our commitments for capital expenditures were not material to our financial condition or results of operations on a consolidated basis.

At December 31, 2023, our commitments for capital expenditures were not material to our financial condition or results of operations on a consolidated basis.

For fiscal 2024, we expect total capital expenditures to be $90.0 million to $95.0 million.

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Contractual Obligations

The following table summarizes our significant obligations outstanding as of June 30, 2023 (unaudited, in thousands):

The following table summarizes our significant obligations outstanding as of December 31, 2023 (unaudited, in thousands):

Payments Due by Fiscal Year

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Off-Balance Sheet Arrangements

As of June 30, 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 $4.3 million and $0.1 million, respectively, and $2.6 million of minimum royalty payments related to aggregates facilities.

As of December 31, 2023, we had aggregate letters of credit outstanding in the amount of $8.3 million, future purchase commitments of diesel fuel and natural gas of $2.9 million and $0.4 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.

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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