What changed in this filing

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Item 1. Financial Statements

2020-08-07 compared with 2020-05-08 · 132 added, 101 removed, 489 unchanged (32% of the section changed)

3 unchanged sentences

(in thousands, except share data)

March 31, September 30,

June 30, September 30,

Current assets:

31 unchanged sentences

Preferred stock, par value $ 0.001 ;

10,000,000 shares authorized at March 31, 2020 and September 30, 2019 and no shares issued and outstanding

10,000,000 shares authorized at June 30, 2020 and September 30, 2019 and no shares issued and outstanding

Class A common stock, par value $ 0.001 ;

400,000,000 shares authorized, 32,705,418 shares issued and outstanding at March 31, 2020, and 32,597,736 shares issued and outstanding at September 30, 2019

400,000,000 shares authorized, 33,430,364 shares issued and outstanding at June 30, 2020, and 32,597,736 shares issued and outstanding at September 30, 2019

Class B common stock, par value $ 0.001 ;

100,000,000 shares authorized, 21,999,279 shares issued and 19,076,327 outstanding at March 31, 2020, and 22,106,961 shares issued and 19,184,009 shares outstanding at September 30, 2019

100,000,000 shares authorized, 21,274,333 shares issued and 18,351,381 outstanding at June 30, 2020, and 22,106,961 shares issued and 19,184,009 shares outstanding at September 30, 2019

Additional paid-in capital 244,627 243,452

8 unchanged sentences

(unaudited in thousands, except share and per share data)

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

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

2020 2019 2020 2019

21 unchanged sentences

(unaudited in thousands, except share data)

For the six months ended March 31, 2020

For the nine months ended June 30, 2020

Class A Common Stock Class B Common Stock Additional

10 unchanged sentences

March 31, 2020 32,705,418 $ 33 21,999,279 $ 22 $ 244,237 $ ( 15,603 ) $ 122,422 $ 351,111

For the six months ended March 31, 2019

Net income — — — — — — 15,747 15,747

Equity-based compensation expense — — — — 390 — — 390

Conversion of Class B common stock to Class A common stock 724,946 1 ( 724,946 ) ( 1 ) — — — —

June 30, 2020 33,430,364 $ 34 21,274,333 $ 21 $ 244,627 $ ( 15,603 ) $ 138,169 $ 367,248

For the nine months ended June 30, 2019

Class A Common Stock Class B Common Stock Additional

9 unchanged sentences

March 31, 2019 11,950,000 $ 12 42,387,571 $ 42 $ 242,493 $ ( 15,603 ) $ 81,891 $ 308,835

Equity-based compensation expense — — — — 146 — — 146

Issuance of stock grant awards 267,343 — — — — — — —

Conversion of Class B common stock to Class A common stock 20,225,202 20 ( 20,225,202 ) ( 20 ) — — — —

Net income — — — — — — 17,202 17,202

June 30, 2019 32,442,545 $ 32 22,162,369 $ 22 $ 242,639 $ ( 15,603 ) $ 99,093 $ 326,183

See notes to consolidated financial statements (unaudited).

2 unchanged sentences

(unaudited in thousands)

For the Six Months Ended March 31,

For the Nine Months Ended June 30,

Cash flows from operating activities:

5 unchanged sentences

Provision for bad debt 451 421

Gain on sale of equipment ( 744 ) ( 1,027 )

Gain on sale of equipment, net ( 1,134 ) ( 1,085 )

Equity-based compensation expense 1,175 146

Earnings from investment in joint venture ( 532 ) ( 925 )

Distribution of earnings from investment in joint venture 139 —

Deferred income taxes ( 197 ) ( 136 )

Other non-cash adjustments ( 12 ) —

15 unchanged sentences

Acquisition of liquid asphalt terminal assets — ( 10,848 )

Distributions received from investment in joint venture 500 1,800

Return of investment in joint venture 361 2,200

Net cash used in investing activities ( 69,183 ) ( 46,348 )

13 unchanged sentences

Non-cash items:

Property, plant and equipment financed with accounts payable $ 794 $ 369

Amounts payable to Seller in business combination $ 2,642 $ —

Property, plant and equipment included with accounts payable at period end $ 1,073 $ 332

See notes to consolidated financial statements (unaudited).

3 unchanged sentences

Construction Partners, Inc.

(the “Company”) is a leading infrastructure and road construction company operating in Alabama, Florida, Georgia, North Carolina and South Carolina through its wholly owned subsidiaries.

(the “Company”) is an infrastructure and road construction company operating in Alabama, Florida, Georgia, North Carolina and South Carolina through its wholly owned subsidiaries.

The Company provides site development, paving, utility and drainage systems services, as well as hot mix asphalt (“HMA”), aggregates, ready-mix concrete, and liquid asphalt cement supply.

The Company executes projects for a mix of private, municipal, state, and federal customers that are both privately and publicly funded.

The majority of the work is performed under fixed unit price contracts and, to a lesser extent, fixed total price contracts.

The majority of the Company’s work is performed under fixed unit price contracts and, to a lesser extent, fixed total price contracts.

The Company is a Delaware corporation and successor by merger to Construction Partners Holdings, Inc., which incorporated in 1999 and began operations in 2001 to execute an acquisition growth strategy in the HMA paving and construction industry.

SunTx Capital Partners (“SunTx”), a private equity firm based in Dallas, Texas, is the Company’s majority investor and has owned a controlling interest in the Company’s stock since the Company’s inception.

The use and consumption of our products and services fluctuate due to seasonality.

Our products are used, and our construction operations and production facilities are located, outdoors.

Therefore, seasonal changes and other weather-related conditions, in particular extended snowy, rainy or cold weather in the winter, spring or fall and major weather events, such as hurricanes, tornadoes, tropical storms and heavy snows, can adversely affect our business and operations through a decline in both the use of our products and demand for our services.

The use and consumption of the Company’s products and services fluctuate due to seasonality.

The Company’s products are used, and its construction operations and production facilities are located, outdoors.

Therefore, seasonal changes and other weather-related conditions, in particular, extended snowy, rainy or cold weather in the winter, spring or fall and major weather events, such as hurricanes, tornadoes, tropical storms and heavy snows, can adversely affect the Company’s business and operations through a decline in both the use of the Company’s products and demand for the Company’s services.

In addition, construction materials production and shipment levels follow activity in the construction industry, which typically occurs in the spring, summer and fall.

Warmer and drier weather during the third and fourth quarters of our fiscal year typically result in higher activity and revenues during those quarters.

The first and second quarters of our fiscal year typically have lower levels of activity due to less favorable weather conditions.

Warmer and drier weather during the third and fourth quarters of the Company’s fiscal year typically result in higher activity and revenues during those quarters.

The first and second quarters of the Company’s fiscal year typically have lower levels of activity due to less favorable weather conditions.

Note 2 - Significant Accounting Policies

3 unchanged sentences

These interim consolidated statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”), which permit reduced disclosure for interim periods.

The Consolidated Balance Sheets as of September 30, 2019 was derived from audited financial statements for the fiscal year then ended, but does not include all necessary disclosures required by accounting principles generally accepted in the United States of America (“GAAP”) with respect to annual financial statements.

The Consolidated Balance Sheet as of September 30, 2019 was derived from audited financial statements for the fiscal year then ended, but does not include all necessary disclosures required by accounting principles generally accepted in the United States of America (“GAAP”) with respect to annual financial statements.

In the opinion of management, the unaudited consolidated financial statements include all recurring adjustments and normal accruals necessary for a fair presentation of the Company’s financial position, results of operations and cash flows for the dates and periods presented.

11 unchanged sentences

As an emerging growth company, the Company could have taken advantage of an exemption that would have allowed the Company to wait to comply with new or revised financial accounting standards until the effective date of such standards for private companies.

However, the Company has irrevocably elected to opt out of such extended transition period, which means that when a new or revised standard has a different effective date for public and private companies, the Company is required to adopt the standard at the effective date applicable to public companies that are not emerging growth companies.

However, the Company has irrevocably elected to opt out of such extended transition period, which means that when a new or revised standard has a different effective date for public and private companies, the Company is required to adopt the standard on the effective date applicable to public companies that are not emerging growth companies.

Cash and Cash Equivalents

7 unchanged sentences

Contracts receivable are generally based on amounts billed and currently due from customers, amounts currently due but unbilled, and amounts retained by the customer pending completion of a project.

It is common in the Company’s industry for a small portion of either progress billings or the contract price, typically 10%, to be withheld by the customer until the Company completes a project to the satisfaction of the customer in accordance with contract terms.

Such amounts, defined as retainage, represent a contract asset and are included on the Consolidated Balance Sheets as “Contracts receivable including retainage, net”.

4 unchanged sentences

Contract Assets and Contract Liabilities

Billing practices for the Company’s contracts are governed by the contract terms of each project based on (i) progress toward completion approved by the owner, (ii) achievement of milestones or (iii) pre-agreed schedules.

Billing practices for the Company’s contracts are governed by the contract terms of each project based on (i) progress toward completion approved by the owner or customer, (ii) achievement of milestones or (iii) pre-agreed schedules.

Billings do not necessarily correlate with revenues recognized under the cost-to-cost input method (formerly known as the percentage-of-completion method).

18 unchanged sentences

The Company generally has the ability to file liens against the property if payments are not made on a timely basis.

No single customer accounted for more than 10.0% of the Company’s contracts receivable including retainage, net balance at March 31, 2020 or September 30, 2019.

Projects performed for various Departments of Transportation accounted for 27.8 % and 37.2 % of consolidated revenues for the three months ended March 31, 2020 and 2019, respectively, and for 29.4 % and 37.2 % of consolidated revenues for the six months ended March 31, 2020 and 2019, respectively.

Two customers accounted for more than 10.0% of consolidated revenues during the three and six months ended March 31, 2019, as follows:

No single customer accounted for more than 10.0% of the Company’s contracts receivable including retainage, net balance at June 30, 2020 or September 30, 2019.

Projects performed for various Departments of Transportation accounted for 36.8 % and 41.8 % of consolidated revenues for the three months ended June 30, 2020 and 2019, respectively, and for 32.3 % and 39.4 % of consolidated revenues for the nine months ended June 30, 2020 and 2019, respectively.

C ustomers that accounted for more than 10.0% of consolidated revenues during those periods are presented below.

% of Consolidated Revenues

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

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

2020 2019 2020 2019

5 unchanged sentences

In addition, the Company derives revenues from the sale of construction materials, including HMA, aggregates, liquid asphalt cement and ready-mix concrete to third-party public and private customers pursuant to contracts with those customers.

The following table reflects, for the periods presented, (i) revenues generated from public infrastructure construction projects and the sale of construction materials to public customers and (ii) revenues generated from private infrastructure construction projects and the sale of construction materials to private customers.

The following table reflects, for the periods presented, (i) the percentage of revenues generated from public infrastructure construction projects and the sale of construction materials to public customers and (ii) the percentage of revenues generated from private infrastructure construction projects and the sale of construction materials to private customers.

% of Consolidated Revenues

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

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

2020 2019 2020 2019

34 unchanged sentences

Revenues derived from the sale of HMA, aggregates, ready-mix concrete, and liquid asphalt are recognized at the point in time at which control of the product is transferred to the customer.

Generally, that point in time is when the customer accepts delivery at its facility or receives product in its own transport vehicles from one of the Company’s HMA plants.

Usually, that point in time is when the customer accepts delivery at its facility or receives product in its own transport vehicles from one of the Company’s HMA plants.

Upon purchase, the Company generally provides an invoice or similar document detailing the goods transferred to the customer.

28 unchanged sentences

The Company endeavors to utilize the best available information in measuring fair value.

The Company’s financial instruments include cash and cash equivalents, contracts receivable including retainage and accounts payable reflected as current assets and current liabilities on its Consolidated Balance Sheets at March 31, 2020 and September 30, 2019.

Due to the short-term nature of these instruments, management considers their carrying value to approximate their fair value.

The Company also has term loans and a revolving credit facility, as described in Note 8 - Debt.

The carrying value of amounts outstanding under these credit facilities is reflected as long-term debt, net of current maturities and current maturities of debt on the Company’s Consolidated Balance Sheets at March 31, 2020 and September 30, 2019.

Due to the variable rate or short-term nature of these instruments, management considers their carrying value to approximate their fair value.

9 unchanged sentences

ASC Topic 842, Leases (“Topic 842”) requires lessees to recognize operating lease right-of-use assets and operating lease liabilities on the balance sheet as described below.

Prior to adoption of Topic 842, operating leases were expensed on a straight-line basis over the lease term on the Company’s Consolidated Statements of Income, and the Company did not recognize operating lease right-of-use assets and operating lease liabilities on its Consolidated Balance Sheets.

Prior to the adoption of Topic 842, operating leases were expensed on a straight-line basis over the lease term on the Company’s Consolidated Statements of Income, and the Company did not recognize operating lease right-of-use assets and operating lease liabilities on its Consolidated Balance Sheets.

The Company adopted Topic 842 effective October 1, 2019 using a modified retrospective transition approach with no prior-period retrospective adjustments.

10 unchanged sentences

The present value calculation may account for an option to extend or terminate the lease when it is reasonably certain that the Company will exercise the option.

The Company has elected not to apply the recognition requirements to short-term leases (those with terms of 12 months or less) or leases to explore for or use minerals.

The Company has elected not to apply the recognition requirements of Topic 842 to short-term leases (those with terms of 12 months or less) or leases to explore for or use minerals.

Instead, for these types of leases, the Company recognizes lease expense in the Consolidated Statements of Income on a straight-line basis over the lease term.

8 unchanged sentences

The acquisition has been accounted for as a business combination in accordance with ASC Topic 805, Business Combinations (“Topic 805”).

The $ 17.7 million purchase price was paid from cash on hand at closing.

The provisional allocation of the purchase price to assets acquired and liabilities assumed, based on their estimated fair values at the acquisition date, was determined in accordance with the methodology described under Fair Value Measurements in Note 2 - Significant Accounting Policies to the Company’s audited financial statements for the fiscal year ended September 30, 2019.

The provisional amounts allocated are $ 9.6 million of property, plant and equipment, $ 0.4 million of other current assets and $ 7.7 million of goodwill.

Goodwill, which is deductible for income tax purposes, primarily represents the assembled work force synergies expected to result from the acquisition.

Upon finalizing the accounting for this transaction, management expects to ascribe value to other identifiable intangible assets, including customer relationships and customer backlog, which would reduce the preliminary amount allocated to goodwill.

The results of operations since the October 1, 2019 acquisition date attributable to this acquisition are included in the consolidated financial statements since the acquisition date and were not material to the Consolidated Statements of Income for the three and six months ended March 31, 2020.

The purchase price of $ 17.7 million was paid from cash on hand at closing.

Identifiable assets acquired and liabilities assumed were recorded at their estimated fair values based on the methodology described under Fair Value Measurements in Note 2 - Significant Accounting Policies.

The amounts allocated were not material to the Company’s Consolidated Balance Sheet.

The amount of the purchase price exceeding the net fair value of identifiable assets acquired and liabilities assumed was recorded as goodwill in the amount of approximately $ 7.7 million, which is deductible for income tax purposes.

Goodwill primarily represents the assembled work force and synergies expected to result from the acquisition.

The results of operations since the October 1, 2019 acquisition date attributable to this acquisition are included in the Company's consolidated financial statements and were not material to the Consolidated Statements of Income for the three and nine months ended June 30, 2020.

Pro forma results of operations as if the acquisition had been consummated October 1, 2018 would not be material to the Consolidated Statements of Income.

The Company recorded certain costs to effect the acquisition as they were incurred, which are reflected in general and administrative expenses on the Company’s Consolidated Statements of Income in the amount of $ 0.1 million for the six months ended March 31, 2020.

Florida Acquisition - March 2020

On March 23, 2020, a subsidiary of the Company acquired two HMA manufacturing plants and certain related assets located in Pensacola and Defuniak Springs, Florida.

These acquired plants enable the Company to serve new markets in the western Florida panhandle.

The acquisition has been accounted for as a business combination in accordance with Topic 805.

The $ 9.8 million purchase price was paid in cash at closing, with an additional $ 2.6 million accrued at March 31, 2020 for plant inventory acquired as of March 23, 2020.

The $ 9.8 million purchase price was paid in cash at closing, with an additional $ 2.6 million of cash paid subsequent to March 31, 2020 for plant inventory.

The provisional amounts allocated are $ 9.7 million of property, plant and equipment, $ 2.6 million of other current assets and $ 0.1 million of goodwill.

1 unchanged sentence

Upon finalizing the accounting for this transaction, management expects to ascribe value to other identifiable intangible assets, including customer relationships and customer backlog, which may reduce the preliminary amount allocated to goodwill.

The results of operations since the March 23, 2020 acquisition date attributable to this acquisition are included in the consolidated financial statements since the acquisition date and were not material to the Consolidated Statements of Income for the three and six months ended March 31, 2020.

Pro forma results of operations as if the acquisition had been consummated October 1, 2018 would not be material to the Consolidated Statements of Income.

Note 5 - Contracts Receivable Including Retainage, net

Contracts receivable including retainage, net consisted of the following at March 31, 2020 and September 30, 2019 (in thousands):

March 31, 2020 September 30, 2019

Contracts receivable including retainage, net consisted of the following at June 30, 2020 and September 30, 2019 (in thousands):

June 30, 2020 September 30, 2019

Contracts receivable $ 112,294 $ 121,050

5 unchanged sentences

Note 6 - Contract Assets and Liabilities

Costs and estimated earnings compared to billings on uncompleted contracts at March 31, 2020 and September 30, 2019 consisted of the following (in thousands):

March 31, 2020 September 30, 2019

Costs and estimated earnings compared to billings on uncompleted contracts at June 30, 2020 and September 30, 2019 consisted of the following (in thousands):

June 30, 2020 September 30, 2019

Costs on uncompleted contracts $ 970,140 $ 900,880

3 unchanged sentences

Net billings in excess of costs and estimated earnings on uncompleted contracts $ ( 18,907 ) $ ( 19,085 )

Significant changes to balances of costs and estimated earnings in excess of billings (contract asset) and billings in excess of costs and estimated earnings (contract liability) on uncompleted contracts from September 30, 2019 to March 31, 2020 are presented below (in thousands):

Costs and Estimated Earnings in Excess of Billings on

3 unchanged sentences

Changes in revenue billed, contract price or cost estimates 3,574 ( 3,396 ) 178

March 31, 2020 (unaudited) $ 16,101 $ ( 29,540 ) $ ( 13,439 )

At March 31, 2020, the Company had unsatisfied or partially unsatisfied performance obligations under construction project contracts representing approximately $ 515.4 million in aggregate transaction price.

June 30, 2020 (unaudited) $ 15,604 $ ( 34,511 ) $ ( 18,907 )

At June 30, 2020, the Company had unsatisfied or partially unsatisfied performance obligations under construction project contracts representing approximately $ 496.0 million in aggregate transaction price.

The Company expects to earn revenue as it satisfies its performance obligations under those contracts in the amount of approximately $ 214.7 million during the remainder of the fiscal year ending September 30, 2020 and $ 281.3 million thereafter.

Note 7 - Property, Plant and Equipment

Property, plant and equipment at March 31, 2020 and September 30, 2019 consisted of the following (in thousands):

March 31, 2020 September 30, 2019

Property, plant and equipment at June 30, 2020 and September 30, 2019 consisted of the following (in thousands):

June 30, 2020 September 30, 2019

Construction equipment $ 250,249 $ 214,500

9 unchanged sentences

Total property, plant and equipment, net $ 236,751 $ 205,870

Depreciation and depletion expense related to property, plant and equipment was $ 9.5 million and $ 7.3 million for the three months ended March 31, 2020 and 2019, respectively, and $ 18.9 million and $ 14.2 million for the six months ended March 31, 2020 and 2019, respectively.

Depreciation and depletion expense related to property, plant and equipment was $ 10.0 million and $ 7.8 million for the three months ended June 30, 2020 and 2019, respectively, and $ 28.9 million and $ 22.1 million for the nine months ended June 30, 2020 and 2019, respectively.

Note 8 - Debt

The Company maintains various credit facilities from time to time to finance acquisitions, the purchase of real estate, construction equipment, plants and other fixed assets, and for general working capital purposes.

These include, among other things, a credit agreement with BBVA USA (“BBVA”), as agent, issuing bank and a lender, and certain other lenders (as amended, the “BBVA Credit Agreement”), which provides for a term loan with an original principal amount of $ 82.0 million (the “Term Loan”) and a $ 30.0 million revolving credit facility (the “Revolving Credit Facility”).

Debt at March 31, 2020 and September 30, 2019 consisted of the following (in thousands):

March 31, 2020 September 30, 2019

During the three and nine months ended June 30, 2020, these included, among other things, a credit agreement with BBVA USA (“BBVA”), as agent, issuing bank and a lender, and certain other lenders (as amended, the “BBVA Credit Agreement”), which provided for a term loan with an original principal amount of $ 82.0 million (the “Term Loan”) and a $ 30.0 million revolving credit facility (the “Revolving Credit Facility”).

Debt at June 30, 2020 and September 30, 2019 consisted of the following (in thousands):

June 30, 2020 September 30, 2019

Long-term debt:

16 unchanged sentences

In March 2020, the Company drew $ 15.0 million on the Revolving Credit Facility to fund the March 23, 2020 Florida acquisition and to provide additional liquidity (see Note 4 - Business Acquisitions).

This borrowing was paid off with the April 2020 Term Loan advance as noted below.

In April 2020, the Company and each of its wholly owned subsidiaries entered into an amendment to the BBVA Credit Agreement that, among other things, (i) provided for a Term Loan advance to the Company in the amount of $ 18.0 million, (ii) established a minimum interest rate for the foregoing Term Loan advance and future Term Loan advances, (iii) adjusted the Term Loan recourse amounts applicable to the Company and its subsidiaries, (iv) increased the amount of the quarterly principal installment payments under outstanding Term Loan advances to $ 2.5 million, and (v) set forth procedures by which the parties will select a replacement benchmark interest rate in the event that LIBOR, the current benchmark interest rate under the Credit Agreement, is no longer available or appropriate as a reference rate upon which to determine the interest rate after December 31, 2021, the date on which contributing banks will no longer be required to submit rate information from which LIBOR is calculated.

Subsequent to June 30, 2020, the Company and each of its wholly owned subsidiaries entered into an Amended and Restated Credit Agreement with BBVA, as agent, sole lead arranger and sole bookrunner, and certain other lenders (the “Amended Credit Agreement”) that amended and restated the BBVA Credit Agreement in its entirety and, among other things, increased the aggregate amount of the commitments of the lenders under the Revolving Credit Facility from $ 30.0 million to $ 50.0 million and increased the Term Loan commitments of the lenders by $ 30.0 million.

For more information about the Amended Credit Agreement, see the discussion under the heading Recent Financing Developments in Note 20 - Subsequent Events.

Note 9 - Equity

Shares of our Class A common stock and Class B common stock are identical in all respects, except with respect to voting rights, conversion rights and transfer restrictions applicable to shares of Class B common stock.

Shares of the Company’s Class A common stock and Class B common stock are identical in all respects, except with respect to voting rights, conversion rights and transfer restrictions applicable to shares of Class B common stock.

The holders of Class A common stock are entitled to one vote per share, and the holders of Class B common stock are entitled to ten votes per share.

The holders of Class A common stock and Class B common stock vote together as a single class on all matters submitted to a vote of stockholders, including the election of directors, unless otherwise required by applicable law or the Company’s certificate of incorporation or bylaws.

The holders of Class A

common stock and Class B common stock vote together as a single class on all matters submitted to a vote of stockholders, including the election of directors, unless otherwise required by applicable law or the Company’s certificate of incorporation or bylaws.

Shares of Class B common stock are convertible into shares of Class A common stock at any time at the option of the holder or upon any transfer, subject to certain limited exceptions.

3 unchanged sentences

Conversion of Class B Common Stock to Class A Common Stock

During the six months ended March 31, 2020, certain stockholders of the Company converted a total of 107,682 shares of Class B common stock into shares of Class A common stock on a one -for-one basis.

During the nine months ended June 30, 2020, certain stockholders of the Company converted a total of 832,628 shares of Class B common stock into shares of Class A common stock on a one -for-one basis.

Following the conversions, there were 33,430,364 shares of Class A common stock and 18,351,381 shares of Class B common stock outstanding.

Secondary Offering of Class A Common Stock

In June 2020, certain stockholders of the Company (the “Selling Stockholders”) completed an underwritten secondary offering (the “Secondary Offering”) of 5,750,000 shares of Class A common stock at a public offering price of $ 16.50 per share.

In addition, the underwriters of the Secondary Offering exercised in full their option to purchase an additional 862,500 shares of Class A common stock from the Selling Stockholders.

The Company did not receive any proceeds from the sale of shares by the Selling Stockholders and, pursuant to a registration rights agreement with the Selling Stockholders, incurred approximately $ 0.2 million in expenses in connection with the Secondary Offering.

Note 10 - Earnings Per Share

2 unchanged sentences

The following table summarizes the weighted-average number of basic common shares outstanding and the calculation of basic earnings per share for the periods presented (in thousands, except share and per share amounts):

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

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

2020 2019 2020 2019

3 unchanged sentences

The following table summarizes the calculation of the weighted-average number of diluted common shares outstanding and the calculation of diluted earnings per share for the periods presented (in thousands, except share and per share amounts):

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

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

2020 2019 2020 2019

8 unchanged sentences

Management evaluated the Company’s tax positions based on appropriate provisions of applicable tax laws and regulations and believes that they are supportable based on their specific technical merits and the facts and circumstances of the respective transactions.

The Company’s effective income tax rate for the three months ended March 31, 2020 and 2019 was 25.7 % and 26.1 %, respectively.

The Company’s effective tax rate for the six months ended March 31, 2020 and 2019 was 20.9 % and 25.1 %, respectively.

The effective income tax rate for the six months ended March 31, 2020 was favorably impacted by the filing of an amended consolidated state return.

The Company’s effective income tax rate for the three months ended June 30, 2020 and 2019 was 23.3 % and 22.3 %, respectively.

The Company’s effective tax rate for the nine months ended June 30, 2020 and 2019 was 22.5 % and 23.3 %, respectively.

The effective income tax rate for the nine months ended June 30, 2020 was favorably impacted by the filing of an amended consolidated state return.

The Company recorded an amended return benefit of $ 0.4 million resulting from the utilization of net operating loss carryforwards and related release of valuation allowance.

1 unchanged sentence

On December 31, 2017, the Company sold an indirect wholly owned subsidiary (the “Disposed Entity”) to an immediate family member of a Senior Vice President of the Company (“Purchaser of Subsidiary”) in consideration for a promissory note in the amount of $ 1.0 million, which approximated the net book value of the Disposed Entity.

At March 31, 2020, $ 0.1 million and $ 0.6 million was reflected on the Company’s Consolidated Balance Sheets within other current assets and other assets, respectively, representing the remaining balances on the promissory note.

In connection with this transaction, the Company also received a promissory note from the Disposed Entity on December 31, 2017 in the amount of $ 1.0 million, representing certain accounts payable of the Disposed Entity that were paid by the Company.

At March 31, 2020, $ 0.1 million and $ 0.4 million was reflected on the Company’s Consolidated Balance

Sheets within other current assets and other assets, respectively, representing the remaining balances on the promissory note.

At June 30, 2020, $ 0.1 million and $ 0.6 million were reflected on the Company’s Consolidated Balance Sheets within other current assets and other assets, respectively, representing the remaining balances on the promissory note.

In connection with this transaction, the Company also received a separate promissory note from the Disposed Entity on December 31, 2017 in the amount of $ 1.0 million, representing certain accounts payable of the Disposed Entity that were paid by the Company.

At June 30, 2020, $ 0.1 million and $ 0.4 million were reflected on the Company’s Consolidated Balance Sheets within other current assets and other assets, respectively, representing the remaining balances on the promissory note.

Remaining payments are scheduled to be made in periodic installments during fiscal year 2020 through fiscal year 2026.

13 unchanged sentences

• The Company is party to a management services agreement with SunTx, under which the Company pays SunTx $ 0.25 million per fiscal quarter and reimburses certain travel and other out-of-pocket expenses associated with services rendered under the management services agreement.

The following table presents revenues earned and expenses incurred by the Company during the three and six months ended March 31, 2020 and 2019, and accounts receivable and payable balances at March 31, 2020 and September 30, 2019, related to transactions with the related parties described above (in thousands):

The following table presents revenues earned and expenses incurred by the Company during the three and nine months ended June 30, 2020 and 2019, and accounts receivable and payable balances at June 30, 2020 and September 30, 2019, related to transactions with the related parties described above (in thousands):

Revenue Earned (Expense Incurred) Accounts Receivable (Payable)

For the Three Months Ended March 31, For the Six Months Ended March 31, March 31, September 30,

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

2020 2019 2020 2019 2020 2019

19 unchanged sentences

The Company recorded a pre-tax gain of $ 14.8 million during the fiscal year ended September 30, 2018 related to the Settlement.

Future payments are reflected on the Consolidated Balance Sheets at March 31, 2020 and September 30, 2019 as other current assets in the amount of $ 3.9 million and $ 7.8 million, respectively.

Future payments are reflected on the Consolidated Balance Sheets at June 30, 2020 and September 30, 2019 as other current assets in the amount of $ 3.9 million and $ 7.8 million, respectively.

Note 14 - Equity-Based Compensation

During the fiscal year ending September 30, 2019, the Company awarded a total of 292,534 restricted shares of Class A common stock to its non-employee directors under the Construction Partners, Inc.

During the fiscal year ended September 30, 2019, the Company awarded a total of 292,534 restricted shares of Class A common stock to its non-employee directors under the Construction Partners, Inc.

2018 Equity Incentive Plan in lieu of cash compensation.

The grants are classified as equity awards.

The aggregate grant date fair value of these restricted awards was $ 3.8 million.

The aggregate grant date fair value of these restricted stock awards was $ 3.8 million.

Two-thirds of the restricted shares of Class A common stock will vest on January 1, 2021, and the remaining one-third will vest on January 1, 2022.

During the three and six months ended March 31, 2020, the Company recorded compensation expense in connection with these grants in the amount of $ 0.4 million and $ 0.8 million, respectively, which is reflected as general and administrative expenses in the Company’s Consolidated Statements of Income.

At March 31, 2020, there was approximately $ 2.4 million of unrecognized compensation expense related to these awards.

During the three and nine months ended June 30, 2020, the Company recorded compensation expense in connection with these grants in the amount of $ 0.4 million and $ 1.2 million, respectively, which is reflected in general and administrative expenses in the Company’s Consolidated Statements of Income.

At June 30, 2020, there was approximately $ 2.0 million of unrecognized compensation expense related to these awards.

Note 15 - Leases

The Company leases certain facilities, office space, vehicles and equipment.

As of March 31, 2020, operating leases under Topic 842 were included in (i) operating lease right-of-use assets, (ii) current portion of operating lease liabilities and (iii) operating lease liabilities, net of current portion on the Company’s Consolidated Balance Sheets in the amounts of $ 8.6 million, $ 2.7 million and $ 6.1 million, respectively.

As of March 31, 2020, the Company had no lease contracts that had not yet commenced but had created significant rights and obligations.

Lease expense was $ 0.9 million and $ 1.8 million during the three months and six months ended March 31, 2020, respectively, which included operating lease costs related to short-term leases.

As of June 30, 2020, operating leases under Topic 842 were included in (i) operating lease right-of-use assets, (ii) current portion of operating lease liabilities and (iii) operating lease liabilities, net of current portion on the Company’s Consolidated Balance Sheets in the amounts of $ 7.9 million, $ 2.4 million and $ 5.7 million, respectively.

As of June 30, 2020, the Company did not have any lease contracts that had not yet commenced but had created significant rights and obligations.

Lease expense was $ 0.9 million and $ 2.7 million during the three months and nine months ended June 30, 2020, respectively, which included operating lease costs related to short-term leases.

During the three months ended December 31, 2019, the Company used cash in the amount of $ 11.5 million to buy out certain operating lease obligations.

As of March 31, 2020, the weighted-average remaining term of the Company’s leases was 8.3 years, and the weighted-average discount rate was 4.00 %.

As of March 31, 2020, the lease liability was equal to the present value of the remaining lease payments, discounted using the incremental borrowing rate on the Company’s secured debt using a single maturity discount rate, as such rate is not materially different from the discount rate applied to each of the leases in the portfolio.

The following table summarizes the Company’s undiscounted lease liabilities outstanding as of March 31, 2020 (in thousands):

As of June 30, 2020, the weighted-average remaining term of the Company’s leases was 8.6 years, and the weighted-average discount rate was 4.00 %.

As of June 30, 2020, the lease liability was equal to the present value of the remaining lease payments, discounted using the incremental borrowing rate on the Company’s secured debt using a single maturity discount rate, as such rate is not materially different from the discount rate applied to each of the leases in the portfolio.

The following table summarizes the Company’s undiscounted lease liabilities outstanding as of June 30, 2020 (in thousands):

Fiscal Year Amount

9 unchanged sentences

Note 16 - Investment in Derivative Instruments

The Company’s operations expose it to a variety of market risks, including the effects of changes in commodity prices.

The Company’s operations expose it to a variety of market risks, including the effects of changes in commodity prices and changes in interest rates.

As part of its risk management process, the Company began entering into commodity swap transactions through regulated commodity exchanges in February 2020.

The Company is exposed to interest rate risk related to its ongoing business operations.

To manage interest rate exposure, the Company has entered into derivative instruments using interest rate swaps.

The objective of entering into interest rate swaps is to eliminate the variability of cash flows associated with movements in interest rates over the life of the loans.

The following table represents the approximate amount of realized and unrealized gains (losses) and changes in fair value recognized in earnings on commodity derivative contracts for the three and six months ended March 31, 2020 and the fair value of these derivatives as of March 31, 2020 and September 30, 2019 (in thousands):

For the Three Months Ended March 31, 2020 (unaudited) For the Six Months Ended March 31, 2020 (unaudited)

The following table represents the approximate amount of realized and unrealized gains (losses) and changes in fair value recognized in earnings on commodity derivative contracts for the three and nine months ended June 30, 2020 and the fair value of these derivatives as of June 30, 2020 and September 30, 2019 (in thousands):

For the Three Months Ended June 30, 2020 (unaudited) For the Nine Months Ended June 30, 2020 (unaudited)

Change in Change in

4 unchanged sentences

Total $ ( 486 ) $ 274 $ ( 212 ) $ ( 556 ) $ ( 1,989 ) $ ( 2,545 )

For the Three Months Ended March 31, 2019 (unaudited) For the Six Months Ended March 31, 2019 (unaudited)

For the Three Months Ended June 30, 2019 (unaudited) For the Nine Months Ended June 30, 2019 (unaudited)

Change in Change in

4 unchanged sentences

Total $ 7 $ ( 212 ) $ ( 205 ) $ 12 $ ( 543 ) $ ( 531 )

March 31, 2020 September 30, 2019

June 30, 2020 September 30, 2019

Balance Sheet Classification (unaudited)

2 unchanged sentences

Other long-term liabilities - interest rate swaps ( 1,897 ) ( 311 )

Net gain (loss) position $ ( 2,574 ) $ ( 311 )

Net unrealized gain (loss) position $ ( 2,300 ) $ ( 311 )

Note 17 - Fair Value Measurements

The following table presents the Company’s liabilities measured at fair value on a recurring basis as of March 31, 2020 and September 30, 2019 under ASC 820 (in thousands):

March 31, 2020 September 30, 2019

The following table presents the Company’s liabilities measured at fair value on a recurring basis as of June 30, 2020 and September 30, 2019 under ASC 820 (in thousands):

June 30, 2020 September 30, 2019

Level 2 Level 2

4 unchanged sentences

Note 18 - Purchase Commitments

As of March 31, 2020, the Company had unconditional purchase commitments for diesel fuel in the normal course of business in the aggregate amount of $ 2.6 million.

As of March 31, 2020, our purchase commitments for the remainder of fiscal year 2020 and annually thereafter were as follows (in thousands):

As of June 30, 2020, the Company had unconditional purchase commitments for diesel fuel in the normal course of business in the aggregate amount of $ 1.9 million.

As of June 30, 2020, our purchase commitments for the remainder of fiscal year 2020 and annually thereafter were as follows (in thousands):

Fiscal Year Amount

1 unchanged sentence

Total $ 1,885

Note 19 - COVID-19 Pandemic

The Company is closely monitoring the impact of the pandemic of the novel strain of coronavirus, known as COVID-19 (“COVID-19”) on all aspects of its business, including how it has impacted and may continue to impact the Company’s customers, employees, suppliers, and vendors.

While the Company did not incur significant disruptions in its operations during the three months ended June 30, 2020 from COVID-19, due to the uncertainties surrounding the COVID-19 pandemic, it is unable to predict the impact that COVID-19 will have on its financial position, operating results and cash flows in future periods.

Note 20 - Subsequent Events

The Company is closely monitoring the impact of the pandemic of the novel strain of coronavirus, known as COVID-19 ("COVID-19") on all aspects of its business, including how it will impact our customers, employees, suppliers, and vendors.

While the Company did not incur significant disruptions during the three months ended March 31, 2020 from COVID-19, due to the uncertainties surrounding the COVID-19 pandemic, it is unable to predict the impact that COVID-19 will have on its financial position, operating results and cash flows in future periods.

Recent financing activities

On April 30, 2020, the Company and each of its wholly owned subsidiaries entered into a Loan Modification Agreement and Amendment to Loan Documents (the “Amendment”), with BBVA and Bank of America.

Among other things, the Amendment amended the Credit Agreement to (i) provide for a Term Loan advance to the Company in the amount of $ 18.0 million, (ii) establish a minimum interest rate for the foregoing Term Loan advance and future Term Loan advances, (iii) adjust the Term Loan recourse amounts applicable to the Company and its subsidiaries, (iv) increase the amount of the quarterly principal installment payments under outstanding Term Loan advances to $ 2.5 million, and (v) set forth procedures by which the parties will select a replacement benchmark interest rate in the event that LIBOR, the current benchmark interest rate under the BBVA Credit Agreement, is no longer available or appropriate as a reference rate upon which to determine the interest rate after December 31, 2021, the date on which contributing banks will no longer be required to submit rate information from which LIBOR is calculated.

Conversion of Class B Common Stock to Class A Common Stock

Subsequent to March 31, 2020, a stockholder of the Company converted a total of 100,000 shares of the Company’s Class B common stock, on a one -for-one basis, into shares of the Company’s Class A common stock.

Subsequent to June 30, 2020, a stockholder of the Company converted a total of 445,520 shares of the Company’s Class B common stock, on a one -for-one basis, into shares of the Company’s Class A common stock.

Following the conversion, there were 33,875,884 shares of Class A common stock and 17,905,861 shares of Class B common stock outstanding.

Recent Financing Activities

On July 30, 2020 (the “Amendment Date”), the Company and each of its wholly owned subsidiaries (collectively, the “Borrowers”) entered into the Amended Credit Agreement, which amended and restated in its entirety the BBVA Credit Agreement.

Immediately prior to the Amendment Date, the aggregate principal amount of Term Loan advances outstanding under the BBVA Credit Agreement was $ 66.1 million, and the aggregate amount of the lenders’ commitments under the Revolving Credit Facility provided by the BBVA Credit Agreement was $ 30.0 million.

The Amended Credit Agreement, among other things, (i) increased the aggregate amount of the lender commitments under the Revolving Credit Facility by $ 20.0 million, (ii) increased the Term Loan commitments by $ 30.0 million, all of which was advanced to the Borrowers on the Amendment Date, and (iii) made certain other amendments and modifications to the BBVA Credit Agreement.

Under the Amended Credit Agreement, the principal amount of Term Loan advances made prior to April 30, 2020 (having an outstanding principal balance of $ 48,550,000 on the Amendment Date) will be repaid in quarterly installments of $ 2,050,000 , and the principal amount of Term Loan advances made on or after April 30, 2020 (having an outstanding principal balance of $ 17,550,000 immediately prior to the Amendment Date) will be repaid in quarterly installments of $ 1,200,000 , in each case beginning on September 30, 2020 and at the end of each calendar quarter thereafter.

Interest will be due and payable on the last business day of each month.

In addition, the Borrowers will pay, among other fees:

(i) a quarterly unused revolver commitment fee equal to 0.20 % of the daily average amount of unused commitments under the Revolving Credit Facility during the quarter, (ii) a quarterly letter of credit fee equal to the greater of (A) $ 600 or (B) the product of either 0.70 % or 0.75 % (depending on the Company’s consolidated leverage ratio) and the aggregate average daily undrawn amounts of all letters of credit outstanding during the quarter and (iii) a letter of credit facility fee equal to 0.20 % of the face amount of each such letter of credit issued in favor of the Borrowers.

All outstanding advances are due and payable in full on October 1, 2024.

The Borrowers generally may (and must, under certain circumstances), subject to various requirements, prepay all or a portion of the outstanding balance of the advances, together with accrued interest thereon, prior to their contractual maturity.

The obligations of the Borrowers under the Amended Credit Agreement and the other loan documents delivered in connection therewith continue to be secured by a first priority security interest in substantially all of the existing and future property of the Borrowers.

The annual interest rates applicable to advances made under the Amended Credit Agreement are calculated, at the Company’s option, by using either a base rate or LIBOR, in each case plus an applicable margin percentage that corresponds to the Company’s consolidated total leverage ratio, which margin percentage will be at least 1.50 % for all advances, whether made prior, on or subsequent to the Amendment Date.

Upon the occurrence of certain triggering events relating to the end of LIBOR, the Borrowers and BBVA will select a different benchmark rate to replace LIBOR as the reference rate for interest accruing on certain advances.

The Amended Credit Agreement contains customary representations and warranties and certain covenants that limit (subject to certain exceptions) the ability of the Borrowers to, among other things, (i) incur or guarantee additional indebtedness, (ii) incur or suffer to exist liens securing indebtedness, (iii) make investments, (iv) consolidate, merge or transfer all or substantially all of their assets, (v) sell assets, (vi) pay dividends or other distributions on, redeem or repurchase capital stock, and (vii) enter into transactions with affiliates.

In addition, the Amended Credit Agreement contains financial covenants that require the Company’s consolidated leverage ratio and fixed charge coverage ratio, in each case as defined in the Amended Credit Agreement, to be less than certain maximum levels.

The Amended Credit Agreement also contains customary events of default.

If such an event of default occurs, the lenders would be entitled to take various actions, including the acceleration of amounts due under the Amended Credit Agreement and actions permitted to be taken by a secured creditor.

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 1. Financial Statements