Greetings, and welcome to the Construction Partners, Inc. 2nd Quarter Earnings Fiscal 2020 Conference Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded.
It is now my pleasure to introduce your host, Rick Black of Investor Relations. Thank you. You may begin.
Thank you, operator, and good morning, everyone. We appreciate you joining us for the Construction Partners conference call to review Q2 fiscal 2020 results. This call is also being webcast and can be accessed through the audio link on the Events and Presentations page of the Investor Relations section on constructionpartners.net. Information recorded on this call speaks only as of today, May 8, 2020, so please be advised that any time sensitive information may no longer be accurate as of
the date of any replay.
I would also like to remind you that the statements made in today's discussion that are not historical facts, including statements of expectations or future events or future financial performance, are considered forward looking statements made pursuant to the safe harbor's provision of the Private Securities Litigation Reform Act of 1995. We will be making forward looking statements as part of today's discussion that are by their nature uncertain and outside of the company's control. Actual results may differ materially. Please refer to the earnings press release that was issued today for our disclosure on forward looking statements. These factors and other risks and uncertainties are described in detail in the company's filings the Securities and Exchange Commission.
Management will also refer to non GAAP measures, including adjusted EBITDA. Reconciliation to the nearest GAAP measures can be found at the end of our earnings press release. Construction Partners assumes no obligation to publicly update or revise any forward looking statements. And now, I would like to turn the call over to Construction Partners' Executive Chairman, Ned Fleming. Ned?
Thank you, Rick, and good morning to everyone. With me on the call today are Charles Owens, President and Chief Executive Officer and Alan Palmer, our Chief Financial Officer. First, I would like to take a moment to address our view and perspective of these current unprecedented times. Most importantly, we want to extend our thoughts and prayers to those most affected by the COVID-nineteen crisis. While we are doing everything we can to support the health and safety of our employees and to assist with the recovery of our communities during this crisis, we are especially grateful for all the hard work of first responders and healthcare workers.
These people have truly been an inspiration to all of us. As this pandemic has brought countless businesses and industries to a halt in recent weeks, companies in the infrastructure industry are deemed essential businesses. Therefore, due to the resiliency of our employees and the effectiveness of the safety protocols we have put in place to counter the current pandemic, our company has experienced only minor disruptions, and we expect it to remain resilient through this crisis. Before Charles and Alan discuss 20 22nd quarter results, I would first like to provide a perspective on the business and how it has historically responded during economic downturns. This was a good quarter that met our expectations.
As we move into the second half of our fiscal year, CPI historically generates 60% of its revenue for the year and margins expand. The continued strength of the company will be reflected in the 2020 outlook we will discuss later. We remain confident in the company's ability to continue year over year growth and have revised our fiscal year 2020 outlook to reflect the current new visibility we have for the business. In the past, we have spoken about the differentiated nature of the CPI business model. The fundamental aspects of the business and our more than 2 decades of operating CPI provides several key strategic factors that have driven the business over time.
1st, demand for road repair and maintenance projects in our footprint with funding mechanisms in place for infrastructure. Second, the recurring nature of road repair and maintenance projects third, shorter duration projects, not mega projects 4th, vertical integration on the hot mix asphalt manufacturing and the services sides of the business Lastly, our advantage in 35 distinct markets benefiting from scale, expertise, technology, vertical integration and flexibility to move crews and equipment, all of which have led to consistent and profitable growth, all of this under the direction of an experienced executive management team and leaders across the whole organization working together with an extremely talented, hardworking, and stable workforce. The combination of all these factors contribute to our confidence that the business model is resilient and consistent in different economic and competitive environments. However, certainly, none of us have ever experienced anything like this pandemic and the economic uncertainty that is unfolding across our country. While we certainly do not think we are immune from this current crisis, we do believe our proven strategy differentiates us and provides a compelling path forward.
We will continue to be prudent as we navigate forward through these dynamic economic times. With that, I would like to turn the call over to Charles and Alan to discuss our 2nd quarter results, and then we will answer your questions. Charles?
Thank you, Ned, and good morning, everyone. We remain focused on the safety and welfare of our employees, our customers and the people in the communities where we live, serve and work. We are pleased with our 2nd quarter results. During the Q2, we acquired 2 hot mix asphalt plants in the Florida Panhandle. From these two locations, we expect to pursue a variety of public, private and Department of Defense projects.
In addition, our asphalt terminal in Panama City, Florida will supply liquid asphalt to both of these plants. In addition, during the quarter, we announced plans to construct a glass sand manufacturing facility adjacent to one of our aggregate facilities in Georgia. The new facility will process material from the mine to produce furnace ready sand of a sufficient quality to be used in the manufacture of glass. This new facility demonstrates our team's ability to pursue creative solutions to satisfy the needs of our customers. Our business model and the construction project work we perform benefit from geographic diversity.
As we operate in multiple states in 35 distinct local markets, Our business model gives us the flexibility by market to pursue both private and public projects. As we progress through fiscal 2020, we plan to continue to pursue controlled profitable growth utilizing our 3 primary levers, doing more work in our current markets, making strategic acquisitions and expanding through Greenfield opportunities. We continue to have conversations with companies both inside and outside of our current footprint that represents potential future acquisitions. Lastly, we are pleased that there is currently an ongoing national discussion about the need for federal infrastructure funding in our country. Recent gas tax increases in a number of states have demonstrated public awareness of the need to adequately fund road repair and maintenance projects.
With the FAST Act expiring later this year, we believe that federal lawmakers recognize the economic and public safety benefits of supporting infrastructure projects, and we are confident that they will find a long term funding solution prior to the end of this year for the repair, maintenance and improvements of one of our country's most valuable assets, our roads. Before turning the call over to Alan, I'd like to thank our leaders and more than 2,300 employees for their commitment, dedication and hard work that enables us to execute our strategy during these challenging times. And with that, I'd like to turn the call over to our CFO, Alan Palmer. Alan?
Thank you, Charles, and good morning, everyone. I want to start by highlighting our key performance metrics in the 2nd quarter. Revenue for the quarter increased to $168,700,000 up $4,400,000 over the same quarter last year. The increase included $11,600,000 of revenue attributable to acquisitions completed subsequent to March 31, 2019, which was offset by a $7,200,000 decrease in revenues in our existing markets. Gross profit for the 2nd quarter increased to $21,000,000 up approximately $1,200,000 over the same period last year, primarily due to higher revenue and a higher gross profit margin.
General and administrative expenses were $16,800,000 in the Q2 of 2020 compared to last year of $14,800,000 The 2 point $1,000,000 increase was primarily the result of a $700,000 increase in management payroll and benefit costs, $700,000 attributable to acquisitions that were made subsequent to March 31, 2019 and $400,000 in non cash stock compensation expenses. Net income was $1,500,000 compared to $4,200,000 and earnings per share was $0.03 compared to $0.08 versus the same periods last year. The changes are primarily due to increase in general and administrative costs explained a moment ago and $2,200,000 of unrealized losses recorded in quarter 2 on swap arrangements. Regarding these swap arrangements, we recorded a $1,400,000 non cash charge to interest expense related to an interest swap on our outstanding debt and an $800,000 non cash charge to other expense related to fuel swaps that we entered into to take advantage of historically low diesel fuel prices. We record these derivative instruments at their fair value and reflect changes in the fair value in current earnings.
These derivative instruments were significantly impacted by financial volatility during March 2020 due to COVID-nineteen and other macroeconomic factors. Adjusted EBITDA increased to $14,200,000 up from $14,000,000 in the prior year quarter. The quarter to 8.5% in the Q2 last year, and it was impacted by our non cash fuel hedge charges and increases in our general and administrative expenses for the quarter as discussed earlier. Turning now to the balance sheet. At March 31, 2020, we had $53,800,000 of cash and $4,000,000 of availability under our $30,000,000 revolving credit facility after deducting outstanding letters of credit.
As of the end of the quarter, our debt to trailing 12 months EBITDA ratio was 0.83. On April 30, we borrowed $18,000,000 under our existing credit facility. We will remain focused on maintaining sufficient liquidity and a strong balance sheet to support our ongoing operations and to enable us to execute on growth opportunities as they arise. Cash provided by operating activities was $20,500,000 for the 6 months ended March 31, 2020, an increase of $15,200,000 from the 6 months ended March 31, 2019. CapEx for the 2nd quarter was $10,900,000 compared to $12,400,000 in the same quarter last year.
For fiscal 2020, we have reduced our capital expenditures to be in the range of $40,000,000 to $42,000,000 and that excludes the $11,500,000 purchase of equipment previously subject to operating leases. This amount does include $4,100,000 for the Class Sand manufacturing facility mentioned by Charles and also $1,800,000 for plant and equipment upgrades related to the Florida acquisition we closed in March. Project backlog at March 31, 2020 was $579,100,000 compared to $539,100,000 at December 31, 2019 $584,800,000 at March 31, 2019. Of our current $579,100,000 backlog, approximately 60% or $360,000,000 is expected to be completed during the remainder of our fiscal year. We maintain a construction backlog composed primarily of recurring maintenance related projects that we typically prefer, and we continue to see opportunities to bid on these types of projects in our markets.
Keep in mind that we focus on our backlog in 35 distinct markets and we strive to have 6 to 9 months of backlog in each of these markets. We also maintain a disciplined approach as we strategically focus on recurring maintenance and repair projects. Historically, backlog builds during our 2nd and third quarters as more of these projects are typically let in February through May. Looking forward, while our operations in the second quarter were largely unaffected by COVID-nineteen, a longer term impact on public and private construction projects is less clear at this time. Due to lower demand for gasoline, which negatively impacts gas tax receipts, the effect on state and municipal road repair and maintenance projects are less clear.
This could slow down our ability to pick up additional repair and maintenance projects typically started and completed in the second half of our fiscal year. And on the private side, there could potentially be delays due to the uncertain economic conditions across our markets. Taking these factors into account, as well as our current project work and current backlog, we are revising our fiscal year 2020 outlook with regard to revenue, net income and adjusted EBITDA as follows. Revenues of $820,000,000 to $830,000,000 compared to $783,000,000 in fiscal year 2019 a net income of $30,000,000 to $34,000,000 compared to $43,100,000 in fiscal year 2019 and adjusted EBITDA of $88,000,000 to $91,000,000 compared to $92,300,000 in fiscal year 2019. In summary, we are pleased with our second quarter results and we continue to see positive market trends and project demand in fiscal 2020.
With that, we'll now take questions. Operator?
Thank you. Our first question is coming from Andrew Wittmann of Baird. Please go ahead.
Great. Good morning.
Good morning, Andy.
And I think maybe on the top of everybody's mind, just kind of what you guys just talked about and a slowing economy here. So the company has been around for 20 years, but hasn't been public all that time. So I was hoping you could talk to us about the 2,009 timeframe and the last kind of big downturn and maybe talk about how your public revenues fared during that time really on an organic basis? I know you guys took advantage of the downturn, did some M and A. And so the company, I think, grew in total, but I think most people are wanting to understand what the organic growth was.
So if you could couch that in maybe looking at one of your more stable operating subsidiaries, I think your Wiregrass operating unit was kind of an organic operating unit during that time. I was just hoping you could maybe quantify or give some context on how that fared?
Yes, Andy, this is Alan. You mentioned about the public and one of the things that we've seen we saw in that period and we've seen in other periods where there's an economic downturn that mostly affects the private work side is that often the public work side is an area where we can pick up additional work because that's generally more stable. In those times in some of those times, there was also a contraction in the amount of gas taxes that were being collected, which is something that we're certainly looking at facing now. But what we saw is that most of the cuts in DOT budgets were to the large projects, where you have long terms to develop plans, so they would cut back on the planning, money being spent for plans, obtaining right of ways. And actually, in some cases, we saw more money going to repair and maintenance type projects.
So typically, if there's a slowdown, there's an emphasis on doing a lot of repair and maintenance type work and keeping those construction employees working. And that's certainly what we saw in 8, 9 and 10. And our expectation is that, that could play itself out again during this pandemic time.
Got it. Thanks. I mean, is there I guess, as you talk to your state and local customers today, I realize things are changing rapidly. But what have you heard from your customers about their ability and desire to move forward with projects so far? Are you seeing them responding to maybe submitted RFP slower, slowing down RFPs that maybe you expected?
What's been really the behavior from those customers that you've seen through May 8 here?
Andy, this is Charles. From a DOT standpoint, we're still we're seeing a little bit of slowdown. And obviously, with the lack of the tax revenue coming in from the fuel. I think everyone's taken a slowdown approach, but we're still seeing where taxes were in place and money has been kind of put in reserve for projects like city and county. We're still seeing some of that, but we're still having lettings and bidding on work.
And from a commercial standpoint, private work standpoint, when it first occurred, we've had a couple projects that were put on stand down and hold up like we would be doing some stuff in phases, and that lasted about 2 to 3 weeks, and then they turned us on full speed ahead. And so those people were feeling good about their projects. And right now, we don't have any projects that I can recall that we've had to postpone or stop work on.
Great. And then just my last question is, just trying to understand how the decline in crude prices might affect you on the positive side, in that obviously you consume a lot of diesel and fuels in your liquid asphalt as well. So, Alan, can you help us understand maybe what percentage of revenue fuels representing liquid asphalt represents and what you're seeing in those marketplaces. Obviously, we can see the diesel prices, but asphalt is a little bit more opaque. Talk about how that could positively impact or if it's positively impacting your margins.
In other words, are you able to keep the savings on that or do your customers wind up benefiting more than you?
Yes. On the diesel, as you said, that's very apparent because people can look at the published prices for that. So one of the things that we did, and I mentioned in the comments that I had that I gave before, normally, we will hedge a portion of our diesel fuel 40% to 50% of our usage using kind of short term swaps and purchase contracts. And with the unprecedented drop that we saw in March, we locked in some much longer contracts on that going on in well into through our fiscal year 2021. The long term impact of that is that we will be able to buy the diesel even going through 2021 at a much reduced price from what we've got in a lot of our bids and what we have historically paid.
The short term impact was because the diesel just kept dropping there and actually went negative on oil, then we had to book about $800,000 non cash charge, which negatively impacted this quarter. But the long term future benefit is we'll be buying that fuel at a very reduced price. So that one's fairly obvious. On the asphalt cement side, I've said before, while it is related to the price of oil, it is not directly correlated as you have with the diesel. Normally during the winter months, liquid asphalt will drop because of the lower utilization and that's one of the reasons we put in the terminal and we saw that happening this year where December, January, February and normally it kind of ends in March.
We saw that happening. But with the drop in the price of oil, we've continued to see that price go down some more since then. But as we've said before, most of the asphalt cement is a pass through cost on our jobs. As it drops, we are able on our non index projects to retain some of that savings, and that, to a little extent was reflected in our 1st 6 months operations, but most of the drop really happened when it would normally be going up again in March and we didn't see it go up, and we've actually seen it in late March, April and even into now drop. So the indexes in the states have dropped some in the last 60 days.
And if that stays down, which we expect it to, we should be able to gain a little bit of margin on that in the second half. But it generally is not a material amount because about 40% or so of our contracts are going to be hedged, I mean, by the index. So we've anticipated from a financial standpoint, we've anticipated that our revenue will be reduced in this last 6 months about $3,000,000 to $4,000,000 but there'll be about a $3,000,000 to $4,000,000 price reduction. So that's one of the reasons our revenue estimate is down is factoring in the effects of the asphalt cement price where we've got to give back part of that to the states.
Got it. Cool. Thank you.
Thank you.
Thank you. Our next question is coming from Michael Feniger of Bank of America. Please go ahead.
Hey, everyone. Thank you for taking my questions. We're hearing that actually we're hearing that road and highway work has been relatively okay because there's no traffic out there. So that's some area of the project that DOTs have been going forward with. I'm curious if you're seeing that based on really some of your comments about some delayed in letting.
So are you seeing current projects you're working on right now being delayed? Or are you or is it more of the cautious and concern that being able to build that backlog through this quarter and maybe even next quarter could be an issue because of what you were stressing before with gasoline down and the tax receipts?
Yes. There have been no delays in the DOT projects. As a matter of fact, a number of the states have escalated the time period in which we can work. Some of our contracts around large cities and on interstates has primarily done night work. And in several of the states we're in, they've allowed us to move those to daytime.
And when you do them at night, you may be only actually able to be on the project about 8 or 9 hours. We're on daytime, we can be on there 10 or 12. So we've actually seen an acceleration of the ability on some of our projects. And of course, as you mentioned, there's less traffic
and
the state's goal on a lot of these maintenance type projects is to accelerate the work that we can do, so that they can get the roads in better shape because there's less traffic out there. So we're actually seeing that as a very positive thing. The I think Charles' comment about the DOT lettings, we've not other than North Carolina, which there's a lot of information out there on, We've not seen the other states actually delay lettings, but we would anticipate that, that could happen later in this calendar year and more into our next fiscal year. We also we've got projects that normally are let during this time that's what we call book and burn. And so with the what's going on out there, our ability to get and book and burn that many projects is something that was factored into the guidance that we gave.
But through our fiscal year end of September 30, we do not anticipate any drawback in the projects that we're able to work on.
Are you seeing anything that we should monitor and keep our eyes out for in terms of a Care Act 2 or a stimulus that would potentially bail out the states? I'm curious how obviously infrastructure conversations would be positive for you guys. But in terms of what you're specifically exposed to and budgets you're exposed to, is there anything that we should be monitoring when it comes to DC? What's the CARES Act do that would have a more direct impact on you?
Michael, this is Charles. I think one thing you need to look at is, obviously, we're seeing less receipts come in from gas tax, which is the funding mechanism for our type work. And if you look at a lot of the research has been done, there's about a $50,000,000,000 shortfall that we'd call let's call it a backstop for DOTs that would need to go in place to shore up about a 30% reduction in revenue. Part of that would go in for 2020 and the majority of it would go into 2021, just anticipating the shortfall. So that's number 1.
Number 2 is we'll have the FAST Act that is going to be coming to an end at the end of September. And so we need a long term highway bill. And as you know, the both parties have been very favorable for these highway bills. And I think that that's something that we're really going to realize and see because at the end of the day when the legislators look at everything, our roads is a very, very valuable asset and they're just going to continue to deteriorate. Right now, we have about a deep grade on our roots.
And when they look at it from a standpoint of moving our products from place to place and but the most valuable thing we move around is our people and our children, and it is a huge safety factor for us to keep these roads in place. And we feel very confident that even in these hard times that there will be some funding to make sure that these roads don't completely tear up. Yes.
And Michael, just to add to that, the two things Charles talked about would be upcoming
legislation that we would you would
be looking for. The states have been allocated substantial amounts of money to states have been allocated substantial amounts of money to kind of shore up their operations and what's going on. And several of the states are looking at potentially taking part of that money that's been allocated to their states and put it into the DOT, which we hope would even if the $50,000,000,000 is not done, would be used to shore up some of that shortfall. So 2 of them are kind of national items. The other one with the money that's already been allocated is possibly using some of that for the DOTs to maintain in the short run what their income shortfall is.
But projects that have already been let and are under contract, those are pretty much funded before those projects are let. So we do not anticipate any projects being stopped with public type like that because that funding is already in place.
Okay. That was helpful. And you guys gave great context to Andrew's question about 2,009. I was just curious, this company is different than 2,009. You guys are operating liquid asphalt plant.
You mentioned the glass manufacturing facility, which hopefully you can give us a little bit more color. I'm just wondering if this new foray and this expansion for Road, is this bringing new operational challenges that we should be aware of that now you're operating these other type of facilities?
No. I mean, we're really just doing the same thing we did then just in more locations. I mean, really the only thing that has changed is the geographic diversity that we have now. And I think that's a positive because in 2000 and eight-two thousand and nine, we were only in Alabama and Florida. Now we're in Georgia and North Carolina.
So 95% of what we do is exactly the same. The glass sand plant, I think as we discussed before, all it is, is taking a product that we already produce in our aggregate facility and that plant will merely modify it slightly so that it can be used in a specialty industry. So it's not going to be a substantial portion of our business. It's just really taking a product we already have and making a slight modification. So we now have a different customer than we would have had before or just a small part of that product that's produced.
Thank you.
Thank you. Our next question is coming from Adam Stellhammer of Thompson Davis. Please go ahead.
Congrats on a solid Q2 and thanks for continuing to give annual guidance here. I wanted to start first on the margins for the back half. It looks like you're guiding to down kind of in the 150 basis point range for both quarters. Is there some conservatism baked into that or something else we need to be aware of?
Well, I've chuckled a little bit. We consider it telling you what we can see. But the primary reason for it, Adam, is that typically this time of the year, we would have a more clear picture on the amount of work that we have to book and burn because as we disclosed, we've got about 80% of the contract backlog that we would complete between now and September 30 under contract. So there's about $77,000,000 that we've got to get and complete. And there's this is the time of the year where that is done.
What we have done is we looked at that and said with all that's going on and that being a little bit larger number than it normally is, we have not built into that unbooked backlog that we're going to be able to obtain it at the same margin that is in our current backlog, because we've got to bid that, we've got to get it, we can complete it, but we've not assumed that, that contract revenue will have the same margin that our current backlog, and that's really a substantial portion of that backside drop in revenue. Another part of that is part of that revenue that we will get in the last 6 months includes the acquisition that we've made and the margin on that work that we booked, while it's not a substantial amount of backlog, we're assuming that what we book and burn on those out of those plants will also be at a lower margin comparable to what the backlog is, which is frankly about half of our backlog. So that acquisition is having a little drag in it. And
so, I
mean, our projection is based on what we know and what we can see. I hope it ends up being conservative, but there's a little bit more uncertainty given the current environment as our ability to book and burn that backlog at the same or better margins than we currently have on jobs in progress.
Okay. That makes sense. And then what should we be thinking in terms of your and I get there's a lot of uncertainty, but in terms of backlog build potential in Q3, because you mentioned that normally you would build in April May. And I think the public side is pretty clear, but what do you guys see in terms of private bidding right now?
Adam, this is Charles.
On the private
side, we're still seeing people move in our market that's moving forward on commercial. I can read reports just like everyone else saying that res is down and the commercial is down. And we're in some pretty good markets. They still continue to be markets where people want to be. And so we're fortunate to be in these growth states.
That's one reason we like the South East and our markets where we are because everyone's no one's immune to what's going on here, but some of these areas have kind of stayed up a little bit stronger than other places.
Okay. And then last one for me. Go ahead, Sark.
I was going to say, ironically, while we have a lot of next year's backlog, we've still got to get, at March 31, our backlog to be completed in next year is actually higher than it has been in the last 2 years. So we at least we're not starting behind the 8 ball for next year's. And typically in this quarter, our 3rd Q4, we are a lot of the backlog that we add is future year backlog in addition to that, that we'll book and burn.
Okay. That's good color. And then last one for me on North Carolina DOT. How concerned should we be about that situation for you guys? Some of our private contacts in North Carolina have said, hey, look, fiscal 2020 holds up pretty well, but man, fiscal 2021 could be really ugly in North Carolina.
What are your thoughts?
We share a little bit of that kind of thought process. 2020, we think, is going to be good coming into 2021. Obviously, there's going to be a shortage there, and that's why we're paying a lot of attention and making a lot of contacts with our leaders in Washington that in order to maintain the safety and the roads, we feel like something is going to have to be done and we feel like that they are act. But as far as North Carolina, this is kind of a little bit of old news because we've been talking about North Carolina for several I think several quarters now that we all know they overspend at one period of time and then we had things kind of looking in a good direction and saw some light at the end of the tunnel where things were turning. And then we started dealing with COVID-nineteen and that's kind of thrown something, a shortage in there.
But North Carolina basically has a great system and they really don't have an issue other than lack of revenue coming in from taxes. Everything's in place that once we get everything swinging back in the economy that there's not going to be any funding issue. We're going to have to just work through this process and it's going to have to just do what we've been doing for the last 6 months. We saw early on kind of what was going on, and we moved some of our product mix around of what we were doing. And then like we say, we got 35 different areas and North Carolina is just one of them, but we're still very bullish on North Carolina.
Yes. And Adam, we had actually to Charles' point, I mean, our last 6 months, North Carolina's DOT, we had already moved away pre COVID from about dropped our percentage, it was with North Carolina DOT by about a third. So while COVID is a short term impact there, we feel like, as Charles said, long term, they have a very strong funding mechanism and they're they will definitely be doing fewer and they've said this publicly of the large mega projects, but they've got roads they've got to maintain up there, and we think that's going to bode well for us once they kind of get some of their short term funding issues resolved.
Understood. I'll turn it over. Thanks, guys.
Thank you.
Our next question is coming from Josh Wolfson of Raymond James. Please go ahead.
Good morning. I hope you and your families are well.
Thank you, John. I was here too.
1st on the glass plant, could you give us some quantification as to the timing of the spending and any color on the financial impacts it might have?
Yes. The $4,100,000 is the budget to construct the facility. We expect that to be probably 90% complete by September 30. And then we're currently targeting being able to produce that glass plant ready sand by October or November. So other than the capital expenditure this year, which we built into our estimate, that's the only thing that will happen this year.
Okay. And then remind us as it relates to your states, how much of your funding is exposed to the gas taxes versus other sources of revenue?
I mean, as far as the DOT budgets, I don't know an exact percentage, but between the federal money that they disperse and the state gas taxes, I would imagine that 75% to 80% or more is that. Different states have license fees and now Alabama taxes for the cars that don't burn gas, the battery operated in those. So but those other fees, I would not think would account for more than 15% of their total budget. So it's primarily from the gas taxes and those the diesel interestingly is not down that much because the truckers are still out there trucking probably more than they were because they can get more miles in because there's very little traffic. It's the gasoline that's down.
But I think Charles said that for 2021 202021, the backstop that the Feds were looking at putting in would replace about the 30% drop. So I think they're estimating that the average drop in gasoline taxes across all the states, both at the federal and state level, would be about 30%.
And is that mix true also of the local?
Very little of the local work is done with gasoline taxes. Most of those are special taxes, sales taxes, because in Alabama, the recent tax act that they did, part of that was is allocated to the cities and counties. But in most states, the cities and counties get their money for their roadwork from other than gasoline taxes. But they will obviously be impacted because if it's coming from sales taxes, that may be down. But we've not even seen any of the cities and counties that have so far delayed projects.
Got it. Good luck with the next quarter.
Thank you.
Thank you. Our next question is coming from Brent Thielman of D. A. Davidson. Please go ahead.
Hey, thank you. Good morning. Thanks for taking the questions.
Welcome, Brett. Good morning.
Just a quick question.
Was there any backlog acquired from the business in Florida?
It was very small and very even smaller margins. So I mean it was only about $5,000,000
Got it. Okay.
The backlog of the quarter.
Okay, perfect. And is there a big difference in terms of the states that you serve today between how much private work you do versus public relative to the overall numbers you guys provide? Or is it pretty similar across all those markets?
Well, it's not so much by state as it is by the individual 35 markets that we're in because that's how we really look at it. So we have the more rural markets that we're in have a lower percentage of private work just because there's not as much development as you would have in a Birmingham or a Raleigh or a Tallahassee, even Huntsville. Huntsville. But so it really varies from the individual markets, not so much by state. And we're fortunate to be, as Charles, I think, mentioned earlier, in some really high growth areas in some of our markets, and I don't think that demand is really changing that much with at least in the short term with COVID.
So we're still seeing a good strong demand in that private work.
Okay. And is there any difference in the profit margins attached to that private work versus public? Is it a little better because it's less competitive? Or is that too wishful?
Again, it varies from market to market, but it's really not. I mean, in some cases, you might have more bidders because qualifications to bid on DOT projects and to have quality control and quality inspections and stuff like that. And the bonding requirement sometimes eliminates some of the smaller competitors. But in a lot of our markets, we work we sell FOB to those smaller competitors that do primarily private work and even use them sometimes as subcontractors. So there's really not a significant difference in the margin profile between one type or the other.
And that's part of the flexibility that we have is to be able to do multiple types of work, whether it be DOT, city, county, private, and it really doesn't impact the margins that much to shift our percentages in certain markets from one to the other. I mean, we try to maintain a reasonable margin for what we do and so.
Okay. Okay. And Alan, I apologize if you touched on this, but it looked like the DSO has picked up a bit again. I think you talked about some changes in processes that maybe some of the agencies last quarter that was having an effect there. Just wondering what caused the pickup again, I think, from 1Q?
Well, actually, the way we calculate it, and I've talked about this before, is our March was a really high revenue month for the average for the quarter. And so calculating it based on the sales that we had during that quarter, it actually went down about 12 days if you break down the quarter into the month. So we saw an improvement in March based on that calculation versus just a total revenue calculation because receivables were up, but our sales in March compared to our sales in December were significantly different. So I think you have to look at it that way. And so that was down about 12 days.
And I know one of the things that we did we have done and we're monitoring every week is part of our concern when COVID came about was that for our private work customers, we needed to make sure that we kind of increased our efforts to make sure that customers who have always paid us well didn't get behind and didn't get delinquent. So we charge the companies with every week, we have a call with the presidents and CFOs and discuss the receivables aging. And then the other thing that we had some concern about from a cash flow standpoint was whether working from home was going to call some of DOTs in the cities and counties because they have a process they have to go through, especially the counties and cities that have to have commission meetings and things like that. Concern was that those might could stretch out some more. But so far, we've really kind of seen the opposite of that.
We even had as a kind of a side note, we had one county in Georgia where they were so concerned about it, they wrote checks out by hand and mailed to us. So I think so far, we found that our customers have been very conscientious about making sure that their disruption, just like what we're experiencing, has not negatively impacted them. So but we monitor that from CPI with a call with them every week to make sure that, that doesn't happen.
Okay. Hey, I appreciate you guys taking the questions. Best of luck and stay safe.
Thank you. You too.
At this time, I'd like to turn the floor back over to management for any additional or closing comments.
Okay. Thank you, everyone, for being on the call. And just want to make sure that you know that our company and our industry is taking COVID-nineteen, all the precautions, very seriously, and we're working hard to make sure that we keep our people safe and our customers and the general public that we work around. And I thank everyone for, like I said, being on the call and everyone be safe. We'll talk to you later.