Construction Partners, Inc. 10-Q

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 2024 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 across the Sunbelt in Alabama, Florida, Georgia, North Carolina, Oklahoma, South Carolina, Tennessee and Texas. 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 U.S. 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 site work construction and HMA paving services to private construction customers, including commercial and residential developers and local businesses. Contract Backlog At December 31, 2024, our contract backlog was $2.66 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 $2.1 billion at December 31, 2024. 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 $0.6 billion at December 31, 2024. Recent Developments Business Acquisitions During the three months ended December 31, 2024, we acquired Lone Star Paving, establishing our first platform company in Texas. As a result of this acquisition, we added 10 HMA plants, four aggregate facilities, and one liquid asphalt terminal. For further discussion regarding this transaction, see Note 4 - Business Acquisitions to the unaudited consolidated financial statements included elsewhere in this report. On January 2, 2025, we acquired all of the outstanding capital stock of Overland Corporation, establishing our first platform company in Oklahoma. As a result of this acquisition, we added eight HMA plants in southern and western Oklahoma. Overland Corporation also provides paving services in northern Texas. For further discussion regarding this transaction, see Note 20 - Subsequent Events to the unaudited consolidated financial statements included elsewhere in this report. 27 Table of Contents On February 3, 2025, we acquired substantially all of the assets of Mobile Asphalt Company LLC, an HMA manufacturing and paving company headquartered in Theodore, Alabama. As a result of this acquisition, we added five HMA plants and expanded our operations in the greater Mobile and southwestern Alabama market areas. For further discussion regarding this transaction, see Note 20 - Subsequent Events to the unaudited consolidated financial statements included elsewhere in this report. Term Loan B Credit Agreement On November 1, 2024, we entered into a Term Loan Credit Agreement with Bank of America, N.A., as administrative agent, BofA Securities, Inc., PNC Capital Markets LLC, Regions Capital Markets, a division of Regions Bank, and TD Securities (USA) LLC, each as joint lead arranger and joint bookrunner, and certain other lenders. The Term Loan B Credit Agreement provides for a senior secured first lien term loan facility in the aggregate principal amount of $850.0 million, which amount was fully drawn on November 1, 2024. A portion of the proceeds of the Term Loan B was used to finance the cash portion of the consideration for the Lone Star Acquisition, including the repayment of certain outstanding indebtedness of Lone Star Paving and its subsidiaries at closing. The remaining loan proceeds were used to repay the Company’s outstanding borrowings under the Revolving Credit Facility provided by the Term Loan A / Revolver Credit Agreement and to pay fees and expenses incurred in connection with the Lone Star Acquisition and related debt financing transaction. For more information about the Term Loan B Credit Agreement, see Note 8 - Debt to the consolidated financial statements included elsewhere in this report. 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, 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. 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 audit, consulting and professional fees, share-based compensation expense, travel, insurance, office space rental costs, property taxes and other corporate and overhead expenses. 28 Table of Contents Acquisition-Related Expenses Acquisition-related expenses include costs incurred in connection with our business acquisitions. These expenses typically include legal, accounting, tax, other professional costs and employee transaction bonuses. 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. Interest Expense, Net Interest expense, net primarily represents interest incurred on our long-term debt, such as the Term Loans and the Revolving Credit Facility, 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, Adjusted EBITDA Margin and Adjusted Net Income 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, (v) loss on the extinguishment of debt and (vi) nonrecurring expenses related to transformative acquisitions, which management considers to include acquisitions requiring clearance under federal antitrust laws, such as the Lone Star Acquisition. Adjusted EBITDA margin represents Adjusted EBITDA as a percentage of revenues for each period. Adjusted net income represents net income before (i) nonrecurring expenses related to transformative acquisitions, which management considers to include acquisitions requiring clearance under federal antitrust laws, such as the Lone Star Acquisition, and (ii) nonrecurring fees associated with financing arrangements incurred in connection with transformative acquisitions, such as a bridge loan associated with the Lone Star Acquisition. 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, Adjusted EBITDA margin and Adjusted net income 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, Adjusted EBITDA margin and Adjusted net income 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. 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 December 31, 2024 2023 Net income (loss) $ (3,051) $ 9,843 Interest expense, net 18,130 3,746 Provision (benefit) for income taxes (849) 3,118 Depreciation, depletion, accretion and amortization 31,184 21,121 Share-based compensation expense 4,920 3,046 Transformative acquisition expenses 18,463 — Adjusted EBITDA $ 68,797 $ 40,874 Revenues $ 561,580 $ 396,505 Adjusted EBITDA margin 12.3 % 10.3 % The following table presents a reconciliation of net income (loss), the most directly comparable measure calculated in accordance with GAAP, to adjusted net income for the periods presented (in thousands): 29 Table of Contents For the Three Months Ended December 31, 2024 2023 Net income (loss) $ (3,051) $ 9,843 Transformative acquisition expenses 18,463 — Financing fees related to transformative acquisition 3,057 — Tax impact due to above reconciling items (5,199) — Adjusted net income $ 13,270 $ 9,843 Results of Operations Three Months Ended December 31, 2024 Compared to Three Months Ended December 31, 2023 The following table sets forth selected financial data for the three months ended December 31, 2024 and 2023 (unaudited in thousands, except percentages): Change From the Three Months Ended For the Three Months Ended December 31, December 31, 2023 to the Three Months Ended 2024 2023 December 31, 2024 Dollars % of Revenues Dollars % of Revenues $ Change % Change Revenues $ 561,580 100.0 % $ 396,505 100.0 % $ 165,075 41.6 % Cost of revenues 485,009 86.4 % 344,625 86.9 % 140,384 40.7 % Gross profit 76,571 13.6 % 51,880 13.1 % 24,691 47.6 % General and administrative expenses (44,266) (7.9) % (35,454) (8.9) % (8,812) 24.9 % Acquisition-related expenses (19,552) (3.5) % (527) (0.1) % (19,025) 3610.1 % Gain on sale of property, plant and equipment 1,055 0.2 % 836 0.2 % 219 26.2 % Operating income 13,808 2.5 % 16,735 4.2 % (2,927) (17.5) % Interest expense, net (18,130) (3.2) % (3,746) (0.9) % (14,384) 384.0 % Other income (expense) 421 0.1 % (28) — % 449 (1603.6) % Income (loss) before provision for income taxes (3,901) (0.7) % 12,961 3.3 % (16,862) (130.1) % Provision (benefit) for income taxes (849) (0.2) % 3,118 0.8 % (3,967) (127.2) % Earnings from investment in joint venture 1 — % — — % 1 — % Net income (loss) $ (3,051) (0.5) % $ 9,843 2.5 % $ (12,894) (131.0) % Adjusted EBITDA $ 68,797 12.3 % $ 40,874 10.3 % $ 27,923 68.3 % Adjusted net income $ 13,270 2.4 % $ 9,843 2.5 % $ 3,427 34.8 % Revenues. Revenues for the three months ended December 31, 2024 increased $165.1 million, or 41.6%, to $561.6 million from $396.5 million for the three months ended December 31, 2023. The increase included $120.9 million of revenues attributable to acquisitions completed during or subsequent to the three months ended December 31, 2023 and an increase of approximately $44.2 million of revenues in our existing markets from contract work and sales of HMA and aggregates to third parties. The 11.2% 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 December 31, 2024 increased $24.7 million, or 47.6%, to $76.6 million from $51.9 million for the three months ended December 31, 2023. The increase in gross profit was primarily the result of the 41.6% increase in revenues for the three months ended December 31, 2024 compared to the three months ended December 31, 2023 and a 30 Table of Contents higher gross profit margin. The higher gross profit margin was due to (i) efficient utilization of our plants, terminals 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 December 31, 2024 increased $8.8 million, or 24.9%, to $44.3 million from $35.5 million for the three months ended December 31, 2023. The increase was attributable to general and administrative expenses associated with the operations of businesses acquired during or subsequent to December 31, 2023 and an increase in share-based compensation expense. Acquisition-related expenses. Acquisition-related expenses for the three months ended December 31, 2024 increased $19.1 million to $19.6 million from $0.5 million for the three months ended December 31, 2023. The increase was primarily due to the $18.5 million of acquisition-related expenses attributable to the Lone Star Acquisition. Gain on Sale of Property, Plant and Equipment. Gain on sale of property, plant and equipment for the three months ended December 31, 2024 increased $0.2 million, or 26.2%, to $1.0 million from $0.8 million for the three months ended December 31, 2023. Interest Expense, Net. Interest expense, net for the three months ended December 31, 2024 increased $14.4 million, or 384.0%, to $18.1 million compared to $3.7 million for the three months ended December 31, 2023. The increase in interest expense, net was primarily related to borrowings under the Term Loan B Credit Agreement that was entered into on November 1, 2024 and $3.1 million of fees associated with the Bridge Facility. Provision for Income Taxes. Our effective tax rate decreased to 21.8% for the three months ended December 31, 2024, from 24.1% for the three months ended December 31, 2023. Our lower effective tax rate during the three months ended December 31, 2024 was due to differences in state tax rates at our operating subsidiaries. Net Income (loss). Net income (loss) decreased $12.9 million, or 131.0%, to a net loss $3.1 million for the three months ended December 31, 2024, compared to net income of $9.8 million for the three months ended December 31, 2023. The decrease in net income was primarily a result of higher general and administrative expenses, acquisition-related expenses and interest expense,net partially offset by an increase in gross profit, all as described above. Adjusted EBITDA and Adjusted EBITDA Margin. Adjusted EBITDA and Adjusted EBITDA Margin were $68.8 million and 12.3%, respectively, for the three months ended December 31, 2024, compared to $40.9 million and 10.3%, respectively, for the three months ended December 31, 2023. The increase in Adjusted EBITDA and Adjusted EBITDA Margin resulted from an increase in gross profit, 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, under the heading “How We Assess Performance of Our Business.” Adjusted Net Income. Adjusted Net Income increased $3.5 million or 34.8%, to adjusted net income of $13.3 million for the three months ended December 31, 2024, from $9.8 million for the three months ended December 31, 2023. The increase in adjusted net income was primarily a result of higher gross profit partially offset by higher general and administrative expenses and interest expense due to the Term Loan B, all as described 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 Three Months Ended December 31, 2024 2023 Net cash provided by operating activities, net of acquisitions $ 40,663 $ 60,378 Net cash used in investing activities (679,030) (104,661) Net cash provided by financing activities 694,751 64,914 Net change in cash and cash equivalents $ 56,384 $ 20,631 Operating Activities During the three months ended December 31, 2024, cash provided by operating activities, net of acquisitions, was $40.7 million, primarily as a result of: 31 Table of Contents • net loss of $3.1 million, including $31.2 million of depreciation, depletion, accretion and amortization and $14.4 million of share-based compensation expense, $1.1 million of gain on sale of property, plant and equipment, and $1.4 million of deferred income tax benefit; • a decrease in contracts receivable including retainage, net of $62.6 million due to normal fluctuations resulting from the timing of processing transactions in our accounts receivable cycle; • an increase in inventories of $10.4 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 $54.0 million due to the timing of processing transactions in our accounts payable cycle; and • 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 $0.5 million due to the timing of performing and closing projects. 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, and $0.8 million gain on sale of property, plant and equipment; • 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 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; and • 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. Investing Activities During the three months ended December 31, 2024, cash used in investing activities was $679.0 million, of which $654.2 million related to acquisitions completed in the period, $26.8 million was invested in property, plant and equipment and $2.3 million was purchases of restricted investments, partially offset by $1.8 million of proceeds from the sale of property, plant and equipment and $2.4 million of proceeds from the sale of restricted investments. 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. Financing Activities During the three months ended December 31, 2024, cash provided by financing activities was $694.8million. We received $835.0 million of net proceeds from our Term Loan B, which were primarily used for the Lone Star Acquisition completed in the period. This cash flow was partially offset by $128.2 million of principal payments on long-term debt and purchase of treasury stock of $12.1 million. 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. Capital Requirements and Sources of Liquidity 32 Table of Contents During the three months ended December 31, 2024 and 2023, our capital expenditures were approximately $26.8 million and $26.8 million, respectively. Our capital expenditures are typically made during the fiscal year in which they are approved. At December 31, 2024, our commitments for capital expenditures were not material to our financial condition or results of operations on a consolidated basis. For fiscal 2025, we expect total capital expenditures to be approximately $130.0 million to $140.0 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, execute our growth strategy through acquisitions 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. Furthermore, on April 12, 2024, we announced that our Board of Directors authorized a stock repurchase program under which up to $40 million is available to purchase shares of our outstanding Class A common stock through September 30, 2025. We intend to utilize the stock repurchase program to minimize the dilutive impact of awards granted under our equity incentive plans and to repurchase shares opportunistically. Shares of Class A common stock may be repurchased from time to time in open market transactions at prevailing market prices, in privately negotiated transactions or by other means in accordance with federal securities laws, including Rule 10b5-1 plans. The stock repurchase program does not obligate the Company to repurchase any shares of Class A common stock, and the stock repurchase program may be modified, suspended, extended or terminated at any time by our Board of Directors. The actual timing, number and value of shares of Class A common stock repurchased will be determined by a committee of the Board of Directors at its discretion and will depend on a number of factors, including the market price of the Class A common stock, capital allocation alternatives, general market and economic conditions and other corporate considerations. During the three months ended December 31, 2024, the Company did not purchase any Class A common stock through our stock repurchase program. 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 Term Loan A / Revolver Credit Agreement will be sufficient to fund our operations, make planned capital expenditures, opportunistically repurchase shares of Class A common stock and fulfill other material contingent contractual obligations for at least the next 12 months. Such material contingent contractual obligations include, without limitation, obligations that we assumed in connection with the Lone Star Acquisition, such as contingent requirements to (i) pay to the former unit holders of Lone Star Paving the amount of working capital remaining in Lone Star Paving at the closing, as finally determined (subject to certain adjustments and offsets) over four quarterly installments and (ii) purchase from the selling unit holders of Lone Star Paving, upon the receipt of necessary governmental entitlements, an entity that owns certain real property located in central Texas for aggregate consideration of $30.0 million. 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 Term Loan A / Revolver Credit Agreement or other credit facilities, 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 December 31, 2024 (unaudited, in thousands): 33 Table of Contents Payments Due by Fiscal Year Total 2025 2026 2027 2028 2029 2030 and Thereafter Debt obligations $ 1,236,875 $ 27,625 $ 40,375 $ 342,250 $ 8,500 $ 8,500 $ 809,625 Purchase agreement obligations due to sellers of Lone Star Paving 116,000 116,000 — — — — — Lease obligations 48,957 9,809 12,388 11,499 7,375 3,214 4,672 Purchase commitments 3,682 2,418 1,264 — — — — Royalty payments 2,429 260 228 216 182 182 1,361 Asset retirement obligations 2,492 — — — — — 2,492 Total $ 1,410,435 $ 156,112 $ 54,255 $ 353,965 $ 16,057 $ 11,896 $ 818,150 Off-Balance Sheet Arrangements As of December 31, 2024, we had aggregate letters of credit outstanding in the amount of $6.6 million, future purchase commitments of diesel fuel and natural gas of $3.3 million and $0.4 million, respectively, and $2.4 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.