What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-05-07 compared with 2021-02-05 · 167 added, 128 removed, 427 unchanged (41% of the section changed)

3 unchanged sentences

(in thousands, except share data)

December 31, September 30,

March 31, September 30,

Current assets:

11 unchanged sentences

Other assets 3,651 1,784

Deferred income taxes 386 386

Deferred income taxes, net 386 386

Total assets $ 615,758 $ 628,114

4 unchanged sentences

Current portion of operating lease liabilities 1,663 2,046

Current maturities of long-term debt 13,000 13,000

Current maturities of debt 13,000 13,000

Accrued expenses and other current liabilities 22,706 22,347

1 unchanged sentence

Long-term liabilities:

Long-term debt, net of current maturities and deferred debt issuance costs 75,867 79,053

Long-term debt, net of current maturities 72,680 79,053

Operating lease liabilities, net of current portion 5,308 5,554

Deferred income taxes 14,003 14,003

Deferred income taxes, net 14,003 14,003

Other long-term liabilities 8,451 8,480

4 unchanged sentences

Preferred stock, par value $ 0.001 ;

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

10,000,000 shares authorized at March 31, 2021 and September 30, 2020 and no shares issued and outstanding

Class A common stock, par value $ 0.001 ;

400,000,000 shares authorized, 33,875,884 shares issued and outstanding at December 31, 2020 and September 30, 2020

400,000,000 shares authorized, 35,719,569 shares issued and outstanding at March 31, 2021, and 33,875,884 shares issued and outstanding at September 30, 2020

Class B common stock, par value $ 0.001 ;

100,000,000 shares authorized, 20,828,813 shares issued and 17,905,861 outstanding at December 31, 2020 and September 30, 2020

100,000,000 shares authorized, 19,495,861 shares issued and 16,572,909 outstanding at March 31, 2021 and 20,828,813 shares issued and 17,905,861 outstanding at September 30, 2020

Additional paid-in capital 245,877 245,022

8 unchanged sentences

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

For the Three Months Ended December 31,

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

2021 2020 2021 2020

Revenues $ 179,112 $ 168,679 $ 370,041 $ 343,993

5 unchanged sentences

Interest expense, net ( 298 ) ( 1,834 ) ( 766 ) ( 2,115 )

Other income 165 65

Income before provision for income taxes and earnings from investment in joint venture 10,540 6,737

Other income (expense) 244 44 409 109

Income (loss) before provision for income taxes and earnings from investment in joint venture ( 6,448 ) 1,998 4,092 8,735

Provision for income taxes 1,513 ( 531 ) ( 1,167 ) ( 1,850 )

Earnings from investment in joint venture — 70 11 113

Net income $ 7,871 $ 5,461

Net income per share attributable to common stockholders:

Net income (loss) $ ( 4,935 ) $ 1,537 $ 2,936 $ 6,998

Net income (loss) per share attributable to common stockholders:

Basic $ ( 0.10 ) $ 0.03 $ 0.06 $ 0.14

7 unchanged sentences

(unaudited in thousands, except share data)

For the three months ended December 31, 2020

For the six months ended March 31, 2021

Class A Common Stock Class B Common Stock Additional

5 unchanged sentences

December 31, 2020 33,875,884 $ 34 20,828,813 $ 21 $ 245,417 $ ( 15,603 ) $ 163,592 $ 393,461

For the three months ended December 31, 2019

Net income (loss) — — — — — — $ ( 4,935 ) $ ( 4,935 )

Conversion of Class B common stock to Class A common stock 1,332,952 1 ( 1,332,952 ) $ ( 1 ) $ — $ — $ — $ —

Equity-based compensation expense — — — — $ 460 — — $ 460

Issuance of stock grant awards 510,733 — — $ — $ — $ — $ — $ —

March 31, 2021 35,719,569 $ 35 19,495,861 $ 20 $ 245,877 $ ( 15,603 ) $ 158,657 $ 388,986

For the six months ended March 31, 2020

Class A Common Stock Class B Common Stock Additional

10 unchanged sentences

December 31, 2019 32,705,418 $ 33 21,999,279 $ 22 $ 243,847 $ ( 15,603 ) $ 120,885 $ 349,184

Net income — — — — — — 1,537 1,537

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

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

See notes to consolidated financial statements (unaudited).

2 unchanged sentences

(unaudited in thousands)

For the Three Months Ended December 31,

For the Six Months Ended March 31,

Cash flows from operating activities:

3 unchanged sentences

Amortization of deferred debt issuance costs and debt discount 127 74

Unrealized gain on derivative instruments ( 1,165 ) ( 66 )

Unrealized (gain) loss on derivative instruments ( 2,377 ) 2,263

Provision for bad debt 361 305

14 unchanged sentences

Other long-term liabilities ( 240 ) ( 24 )

Net cash provided by operating activities, net of acquisition 709 1,686

Net cash provided by operating activities, net of acquisitions 2,398 20,615

Cash flows from investing activities:

2 unchanged sentences

Business acquisitions, net of cash acquired ( 84,494 ) ( 30,191 )

Distributions received from investment in joint venture — 361

Return of investment in joint venture — 361

Net cash used in investing activities ( 110,465 ) ( 62,923 )

13 unchanged sentences

Non-cash items:

Property, plant and equipment financed with accounts payable $ 1,549 $ 391

Property, plant and equipment included with accounts payable at period end $ 1,663 $ 794

Non-compete agreements to seller in business combination $ 1,700 $ —

Amounts payable to seller in business combination $ 250 $ 2,642

See notes to consolidated financial statements (unaudited).

21 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 Sheet as of September 30, 2020 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 Company's Consolidated Balance Sheets as of September 30, 2020 were derived from the Company's audited financial statements for the fiscal year then ended, but do 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, these 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.

9 unchanged sentences

Emerging Growth Company

The Company is an “emerging growth company,” as defined by the Jumpstart Our Business Startups Act (the “JOBS Act”) enacted in April 2012.

The Company is an “emerging growth company,” as defined by the Jumpstart Our Business Startups Act enacted in April 2012.

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.

10 unchanged sentences

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 the applicable 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”.

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

Based on the Company’s experience with similar contracts in recent years, billings for such retainage balances are generally collected within one year of the completion of the project.

The carrying value of contracts receivable including retainage, net of the allowance for doubtful accounts, represents their estimated net realizable value.

Management provides for uncollectible accounts through a charge to earnings and a credit to the allowance for doubtful accounts based on its assessment of the current status of individual accounts, type of service performed, and current economic conditions.

Balances that are still outstanding after management has used reasonable collection efforts are written off through a charge to the allowance for doubtful accounts and an adjustment of the contract receivable.

Contracts receivable including retainage, net are stated at the amount management expects to collect from outstanding balances.

Contract Assets and Contract Liabilities

13 unchanged sentences

Concentration of Risks

Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of contracts receivable including retainage.

Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of contracts receivable including retainage, net.

In the normal course of business, the Company provides credit to its customers and does not generally require collateral.

4 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% of the Company’s contracts receivable including retainage, net balance at December 31, 2020 or September 30, 2020.

Projects performed for various Departments of Transportation accounted for 27.8 % and 31.0 % of consolidated revenues for the three months ended December 31, 2020 and 2019, respectively.

The only c ustomer that accounted for more than 10% of consolidated revenues during either of those periods is presented below.

% of Consolidated Revenues

for the Three Months Ended December 31,

Alabama Department of Transportation 7.2 % 10.8 %

No single customer accounted for more than 10% of the Company’s contracts receivable including retainage, net balance at March 31, 2021 or September 30, 2020.

Projects performed for various Departments of Transportation accounted for 26.1 % and 27.8 % of consolidated revenues for the three months ended March 31, 2021 and 2020, respectively, and for 27.0 % and 29.4 % of consolidated revenues for the six months ended March 31, 2021 and 2020, respectively.

No single customer accounted for more than 10% of consolidated revenues during the three and six months ended March 31, 2021 and 2020.

Revenues from Contracts with Customers

3 unchanged sentences

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 December 31,

% of Consolidated Revenues

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

2021 2020 2021 2020

Private 41.8 % 39.4 % 41.2 % 39.4 %

10 unchanged sentences

A reduction to costs related to back charges is recognized when the estimated recovery is probable and the amount can be reasonably estimated.

Contract costs consist of (i) direct costs on contracts, including labor, materials, and amounts payable to subcontractors and

(ii) indirect costs related to contract performance, such as insurance, employee benefits, and equipment (primarily depreciation, fuel, maintenance and repairs).

Contract costs consist of (i) direct costs on contracts, including labor, materials, and amounts payable to subcontractors and (ii) indirect costs related to contract performance, such as insurance, employee benefits, and equipment (primarily depreciation, fuel, maintenance and repairs).

Progress toward completion is estimated using the input method, measured by the relationship of total cost incurred through the measurement date to total estimated costs required to complete the project (cost-to-cost method).

37 unchanged sentences

None of the Company’s derivative instruments are designated as hedges for accounting purposes under the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 815, Derivatives and Hedging .

Accordingly, the Company records derivative instruments on the Consolidated Balance Sheets as either an asset or liability measured at fair value and records changes in the fair value of derivatives in current earnings in the Consolidated Statements of Income for the period in which the change occurs.

Accordingly, the Company records derivative instruments on its Consolidated Balance Sheets as either an asset or liability measured at fair value and records changes in the fair value of derivatives in current earnings in the Consolidated Statements of Income for the period in which the change occurs.

Gains and losses on derivatives are included in cash flows from operating activities.

8 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 December 31, 2020 and September 30, 2020.

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 December 31, 2020 and September 30, 2020.

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

Under the new guidance, an entity recognizes as an allowance its estimate of expected credit losses, which the FASB believes will result in more timely recognition of such losses.

The amendments pursuant to Topic 326 were effective for fiscal years beginning after December 15, 2019, including

interim periods within those fiscal years.

The amendments pursuant to Topic 326 were effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years.

The Company adopted this guidance effective October 1, 2020 as required and noted no material impact to the Company’s consolidated financial statements.

2 unchanged sentences

ASU 2018-15 was effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years.

The Company adopted this guidance effective October 1, 2020 as required and noted no material impact to the Company’s consolidated financial statements.

adopted this guidance effective October 1, 2020 as required and noted no material impact to the Company’s consolidated financial statements.

Note 4 - Business Acquisitions

7 unchanged sentences

Upon finalizing the accounting for these transactions, management expects to ascribe value to other identifiable intangible assets, including customer relationships and customer backlog, which will reduce the provisional amount allocated to goodwill.

For the acquisitions completed during the three months ended December 31, 2020, the Company paid combined consideration of $ 84.1 million, provisionally allocated as follows:

$ 4.0 million of inventory, $ 0.8 million of other current assets, $ 48.6 million of property, plant and equipment and $ 30.7 million of goodwill, which is expected to be deductible for income tax purposes.

An additional payable of $ 0.3 million for property, plant and equipment is included in accounts payable at December 31, 2020.

The Consolidated Statement of Income for the three months ended December 31, 2020 includes $ 7.1 million of revenue and a $( 0.2 ) million in net loss attributable to the operations of these acquisitions from their respective acquisition dates through December 31, 2020.

Results of Operations of Acquisitions Completed Subsequent to December 31, 2019

Unaudited consolidated pro forma revenues and net income, as if our acquisitions completed subsequent to December 31, 2019 (including those described above) had been completed as of October 1, 2019 are as follows (in thousands):

For the Three Months Ended December 31,

For these acquisitions, the Company has paid combined consideration of $ 84.5 million, provisionally allocated as follows:

$ 4.0 million of inventory, $ 49.4 million of property, plant and equipment and $ 31.1 million of goodwill, which is expected to be deductible for income tax purposes.

An additional payable of $ 0.3 million for property, plant and equipment is included in accounts payable at March 31, 2021.

The Consolidated Statements of Income includes $ 12.2 million of revenue and $( 3.0 ) million of net loss attributable to the operations of these acquisitions for the three months ended March 31, 2021 and $ 19.3 million of revenue and $( 3.2 ) million of net loss attributable to the operations of these acquisitions for the six months ended March 31, 2021 from their respective acquisition dates.

Results of Operations of Acquisitions Completed Subsequent to March 31, 2020

Unaudited consolidated pro forma revenues and net income, as if acquisitions completed by the Company subsequent to March 31, 2020 (including those described above) had been completed as of October 1, 2019 are as follows (in thousands):

For the Three Months Ended March 31,

Pro forma revenues $ 179,112 $ 183,622

Pro forma net income (loss) $ ( 4,935 ) $ ( 1,287 )

For the Six Months Ended March 31,

Pro forma revenues $ 390,564 $ 391,624

Pro forma net income $ 3,704 $ 5,272

1 unchanged sentence

Note 5 - Contracts Receivable Including Retainage, net

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

December 31, 2020 September 30, 2020

Contracts receivable including retainage, net consisted of the following at March 31, 2021 and September 30, 2020 (in thousands):

March 31, 2021 September 30, 2020

Contracts receivable $ 104,067 $ 112,197

5 unchanged sentences

Note 6 - Contract Assets and Liabilities

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

December 31, 2020 September 30, 2020

Costs and estimated earnings compared to billings on uncompleted contracts at March 31, 2021 and September 30, 2020 consisted of the following (in thousands):

March 31, 2021 September 30, 2020

Costs on uncompleted contracts $ 888,654 $ 876,229

3 unchanged sentences

Net billings in excess of costs and estimated earnings on uncompleted contracts $ ( 8,768 ) $ ( 25,831 )

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, 2020 to December 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 9,802 7,261 17,063

December 31, 2020 (unaudited) $ 12,148 $ ( 30,930 ) $ ( 18,782 )

At December 31, 2020, the Company had unsatisfied or partially unsatisfied performance obligations under construction project contracts representing approximately $ 516.3 million in aggregate transaction price.

The Company expects to earn revenue as it satisfies its performance obligations under such contracts in the amount of approximately $ 415.9 million during the remainder of the fiscal year ending September 30, 2021 and $ 100.4 million thereafter.

March 31, 2021 (unaudited) $ 17,675 $ ( 26,443 ) $ ( 8,768 )

At March 31, 2021, the Company had unsatisfied or partially unsatisfied performance obligations under construction project contracts representing approximately $ 558.6 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 $ 378.2 million during the remainder of the fiscal year ending September 30, 2021 and $ 180.4 million thereafter.

Note 7 - Property, Plant and Equipment

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

December 31, 2020 September 30, 2020

Property, plant and equipment at March 31, 2021 and September 30, 2020 consisted of the following (in thousands):

March 31, 2021 September 30, 2020

Construction equipment $ 291,893 $ 253,157

9 unchanged sentences

Total property, plant and equipment, net $ 289,893 $ 237,230

Depreciation and depletion expense related to property, plant and equipment was $ 11.0 million and $ 9.4 million for the three months ended December 31, 2020 and 2019, respectively.

Depreciation and depletion expense related to property, plant and equipment was $ 12.2 million and $ 9.5 million for the three months ended March 31, 2021 and 2020, respectively, and $ 23.2 million and $ 18.9 million for the six months ended March 31, 2021 and 2020, respectively.

Note 8 - Debt

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

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

December 31, 2020 September 30, 2020

Debt at March 31, 2021 and September 30, 2020 consisted of the following (in thousands):

March 31, 2021 September 30, 2020

Long-term debt:

4 unchanged sentences

Current maturities of long-term debt ( 13,000 ) ( 13,000 )

Long-term debt, net of current maturities and deferred debt issuance costs $ 75,867 $ 79,053

Long-term debt, net of current maturities $ 72,680 $ 79,053

The Company and each of its subsidiaries are parties to a credit agreement with BBVA USA, as agent, issuing bank and a lender, and certain other lenders (as amended and restated, the “Credit Agreement”).

6 unchanged sentences

All outstanding advances under the Term Loan and the Revolving Credit Facility are due and payable in full on October 1, 2024.

The Company 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 Company 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.

Note 9 - Equity

6 unchanged sentences

Class A common stock is not convertible into any other class of the Company’s capital stock.

Conversion of Class B Common Stock to Class A Common Stock

During the three months ended March 31, 2021, certain stockholders of the Company converted a total of 1,332,952 shares of Class B common stock into shares of Class A common stock on a one -for-one basis.

As of March 31, 2021, there were 35,719,569 shares of Class A common stock and 16,572,909 shares of Class B common stock outstanding.

S econdary Offering of Class A Common Stock

In March 2021, certain stockholders of the Company (the “Selling Stockholders”) completed an underwritten secondary offering (the “Secondary Offering”) of 2,000,000 shares of Class A common stock at a public offering price of $ 31.25 per share.

The Company did no t 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.

Restricted Stock Awards

During the six months ended March 31, 2021, the Company awarded a total of 510,733 restricted shares of Class A common stock to Company management under the Construction Partners, Inc.

2018 Equity Incentive Plan (the “Equity Incentive Plan”).

Additional information about these transactions is set forth in Note 13 - Equity-Based Compensation.

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 (unaudited in thousands, except share and per share amounts):

For the Three Months Ended December 31,

Net income attributable to common shareholders $ 7,871 $ 5,461

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

2021 2020 2021 2020

Net income (loss) attributable to common shareholders $ ( 4,935 ) $ 1,537 $ 2,936 $ 6,998

Weighted average number of common shares outstanding, basic 51,686,652 51,489,211 51,586,846 51,489,211

Net income per common share attributable to common shareholders, basic $ 0.15 $ 0.11

Net income (loss) per common share attributable to common shareholders, basic $ ( 0.10 ) $ 0.03 $ 0.06 $ 0.14

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 (unaudited in thousands, except share and per share amounts):

For the Three Months Ended December 31,

Net income attributable to common stockholders $ 7,871 $ 5,461

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

2021 2020 2021 2020

Net income (loss) attributable to common stockholders $ ( 4,935 ) $ 1,537 $ 2,936 $ 6,998

Weighted average number of basic common shares outstanding, basic 51,686,652 51,489,211 51,586,846 51,489,211

Effect of dilutive securities:

2019 restricted stock grants 228,637 120,169

Restricted stock grants under 2018 Equity Incentive Plan — 130,192 86,736 123,129

Weighted average number of diluted common shares outstanding 51,686,652 51,619,403 51,673,582 51,612,340

51,717,848 51,609,380

Net income per diluted common share attributable to common stockholders $ 0.15 $ 0.11

Net income (loss) per diluted common share attributable to common stockholders $ ( 0.10 ) $ 0.03 $ 0.06 $ 0.14

Note 11 - Provision for Income Taxes

1 unchanged sentence

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 December 31, 2020 and 2019 was 25.4 % and 19.5 %, respectively.

The effective income tax rate for the three months ended December 31, 2019 was favorably impacted by the filing of an amended consolidated state return.

The Company’s effective income tax rate for the three months ended March 31, 2021 and 2020 was 23.5 % and 25.7 %, respectively.

The Company’s effective tax rate for the six months ended March 31, 2021 and 2020 was 28.4 % and 20.9 %, 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 recorded an amended return benefit of $ 0.4 million resulting from the utilization of net operating loss carryforwards.

1 unchanged sentence

On December 31, 2017, the Company sold an indirect wholly owned subsidiary to an immediate family member of an executive officer of the Company (“Purchaser of Subsidiary”) in consideration for an interest-bearing note receivable in the amount of $ 1.0 million, which approximated the net book value of the disposed entity.

At December 31, 2020, $ 0.1 million and $ 0.5 million was reflected on the Company’s Consolidated Balance Sheets within other current assets and other assets, respectively, representing the remaining balances on this note receivable.

In connection with this transaction, the Company also received an interest-bearing note receivable from the disposed entity (“Disposed entity”) on December 31, 2017 in the amount of $ 1.0 million representing certain accounts payable of the disposed subsidiary that were paid by the Company.

At December 31, 2020, $ 0.1 million and $ 0.3 million was reflected on the Company’s Consolidated Balance Sheets within other current assets and other assets, respectively, representing the remaining balances on this note receivable.

At March 31, 2021, $ 0.1 million and $ 0.5 million was reflected on the Company’s Consolidated Balance Sheets within other current assets and other assets, respectively, representing the remaining balances on this note receivable.

In connection with this transaction, the Company also received an interest-bearing note receivable from the disposed entity (“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, 2021, $ 0.1 million and $ 0.3 million was reflected on the Company’s Consolidated Balance Sheets within other current assets and other assets, respectively, representing the remaining balances on this note receivable.

Remaining principal and interest payments are scheduled to be made in periodic installments during fiscal year 2021 through fiscal year 2026.

Prior to its acquisition by the Company, a current subsidiary of the Company advanced funds to an entity owned by an immediate family member of an officer of the Company in connection with a land development project.

The obligations of the borrower entity to repay the advances were guaranteed by a separate entity owned by the same family member of the officer.

Amounts outstanding under the advances did not bear interest and matured in full in March 2021.

In March 2021, the subsidiary of the Company amended and restated the terms of the repayment obligation, as a result of which the officer personally assumed the remaining balance of the obligation.

No new amounts were advanced to the officer by the Company or any subsidiary or affiliate thereof in connection with the transaction.

Under the amended and restated terms, the officer executed a promissory note in favor of the Company’s subsidiary in the principal amount of $ 0.8 million.

The note bears simple interest at a rate of 4.0 % and requires annual minimum payments of $ 0.1 million inclusive of principal and accrued interest, with any remaining principal and accrued interest due and payable in full on

December 31, 2027.

As security for his payment obligations, the officer pledged as collateral 30,000 shares of the 140,389 shares of Class B common stock that had previously been pledged as collateral and 7,500 shares of Class A common stock owned by the officer personally.

Amounts outstanding under the note are reflected on the Company’s Consolidated Balance Sheets within other current assets and other assets (“Land Development Project”).

From time to time, the Company conducts or has conducted business with the following related parties:

• Prior to its acquisition by the Company, a current subsidiary of the Company advanced funds to an entity owned by an immediate family member of an executive officer of the Company in connection with a land development project.

The obligations of the borrower entity to repay the advances are guaranteed by a separate entity owned by the same family member of the officer.

Amounts outstanding under the advances do not bear interest and are reflected on the Company's Consolidated Balance Sheet within other assets (“Land Development Project”).

• Entities owned by immediate family members of an executive officer of the Company perform subcontract work for a subsidiary of the Company, including trucking and grading services (“Subcontracting Services”).

• From time to time, a subsidiary of the Company provides construction services to various companies owned by family members an executive officer of the Company (“Construction Services”).

• From time to time, a subsidiary of the Company provides construction services to various companies owned by family members of an executive officer of the Company (“Construction Services”).

• Since June 1, 2014, the Company has been a party to an access agreement with Island Pond Corporate Services, LLC, which provides a location for the Company to conduct business development activities from time to time on a property owned by the Executive Chairman of the Company’s Board of Directors (“Island Pond”).

3 unchanged sentences

• The Company is party to a management services agreement with SunTx, under which the Company pays SunTx $ 0.27 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 months ended December 31, 2020 and 2019, and accounts receivable and payable balances at December 31, 2020 and September 30, 2020, 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 six months ended March 31, 2021 and 2020, and accounts receivable and payable balances at March 31, 2021 and September 30, 2020, related to transactions with the related parties described above (in thousands):

Revenue Earned (Expense Incurred) Accounts Receivable (Payable)

For the Three Months Ended December 31, December 31, September 30,

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

2021 2020 2021 2020 2021 2020

(unaudited) (unaudited) (unaudited)

(unaudited) (unaudited) (unaudited) (unaudited) (unaudited)

Purchaser of Subsidiary $ — $ — $ — $ — $ 621 $ 621

2 unchanged sentences

Subcontracting Services ( 425 ) (1) ( 448 ) (1) ( 2,603 ) (1) ( 2,025 ) (1) ( 362 ) ( 654 )

$ ( 1,578 ) (1)

$ ( 312 ) $ ( 654 )

Construction Services 119 (2) 254 (2) 119 (2) 1,534 (2) 211 123

2 unchanged sentences

Vehicles - Rent Expense ( 49 ) (2) ( 198 ) (2) ( 127 ) (2) ( 401 ) (2) — —

$ ( 203 ) (2)

Consulting Services — (2) ( 72 ) (2) ( 32 ) (2) ( 143 ) (2) — —

SunTx ( 521 ) (2) ( 357 ) (2) ( 1,138 ) (2) ( 671 ) (2) — —

$ ( 314 ) (2)

(1) Cost is reflected as cost of revenues on the Company’s Consolidated Statements of Income.

2 unchanged sentences

Note 13 - Equity-Based Compensation

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 (the “2018 Equity Plan”) in lieu of any cash compensation.

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 Equity Incentive Plan in lieu of any cash compensation.

The grants are classified as equity awards.

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

Two-thirds of the underlying shares vested on January 1, 2021, and the remaining one-third of the underlying shares will vest on January 1, 2022.

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

At December 31, 2020, there was approximately $ 1.3 million of unrecognized compensation expense related to these awards.

During the three and six months ended March 31, 2021, the Company recorded compensation expense in connection with these grants in the amount of $ 0.3 million and $ 0.7 million, respectively, which is reflected as general and administrative expenses in the Company’s Consolidated Statements of Income.

At March 31, 2021, there was approximately $ 1.0 million of unrecognized compensation expense related to these awards.

During the quarter ended March 31, 2021, the Company awarded a total of 510,733 restricted shares of Class A common stock to Company management under the Equity Incentive Plan.

The grants are classified as equity awards.

The aggregate grant date fair value of these restricted awards was $ 13.6 million.

During the three months ended March 31, 2021, the Company recorded compensation expense in connection with these grants in the amount of $ 0.2 million, which is reflected as general and administrative expenses in the Company’s Consolidated Statements of Income.

At March 31, 2021, there was approximately $ 13.4 million of unrecognized compensation expense related to these awards.

The underlying shares subject to awards granted under the Equity Incentive Plan vested or will vest, as applicable, as follows:

Fiscal Year Number of Shares

Total 803,267

Note 14 - Leases

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

As of December 31, 2020, operating leases under ASC Topic 842, Leases, 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 $ 6.9 million, $ 1.7 million and $ 5.4 million, respectively.

As of December 31, 2020, the Company did not have any lease contracts that had not yet commenced but had created significant rights and obligations.

As of March 31, 2021, operating leases under ASC Topic 842, Leases, 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 $ 6.8 million, $ 1.7 million and $ 5.3 million, respectively.

As of March 31, 2021, the Company had no lease contracts that had not yet commenced but had created significant rights and obligations.

The components of lease expense were as follows for the periods presented (in thousands):

For the Three Months Ended December 31,

For the Three Months Ended March 31,

(unaudited) (unaudited)

2 unchanged sentences

Total lease expense $ 3,188 $ 4,558

Short-term leases (those with terms of 12 months or less) are not capitalized but are expensed on a straight-line basis over the lease term.

The majority of our short-term leases relate to equipment used on construction projects.

These leases are entered into at periodic

rental rates for an unspecified duration and typically have a termination for convenience provision.

For the Six Months Ended March 31,

(unaudited) (unaudited)

Operating lease cost $ 1,353 $ 1,777

Short-term lease cost 5,125 7,363

Total lease expense $ 6,478 $ 9,140

Short-term leases (i.e., those with terms of 12 months or less) are not capitalized but are expensed on a straight-line basis over the lease term.

The majority of the Company's short-term leases relate to equipment used on construction projects.

These leases are entered into

at periodic rental rates for an unspecified duration and typically have a termination for convenience provision.

Short-term lease cost includes leases with terms of one month or less.

As of December 31, 2020, the weighted-average remaining term of the Company’s leases was 9.2 years, and the weighted-average discount rate was 4.00 %.

As of December 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 December 31, 2020 (unaudited in thousands):

Fiscal Year Amount

As of March 31, 2021, the weighted-average remaining term of the Company’s leases was 9.3 years, and the weighted-average discount rate was 3.96 %.

As of March 31, 2021, 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, 2021 (in thousands):

Fiscal Year Amount (unaudited)

Remainder of 2021 $ 1,008

6 unchanged sentences

however, certain agreements have minimum annual payments.

Royalty expense recorded in cost of revenue during the three months ended December 31, 2020 and 2019 was $ 0.2 million.

Royalty expense recorded in cost of revenue was $ 0.2 million for the three months ended March 31, 2021 and 2020 and $ 0.4 million for the six months ended March 31, 2021 and 2020.

Note 15 - Investment in Derivative Instruments

2 unchanged sentences

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.

At December 31, 2020, the aggregate notional value of these interest rate swap agreements was $ 44.5 million.

The following tables represent the approximate amount of realized and unrealized gains (losses) recognized in earnings on commodity derivative contracts and interest rate swap agreements for the three months ended December 31, 2020 and 2019 and the fair value of these derivatives as of December 31, 2020 and September 30, 2020 (in thousands):

For the Three Months Ended December 31,

(unaudited) (unaudited)

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.

At March 31, 2021, the aggregate notional value of these interest rate swap agreements was $ 42.4 million.

The following tables represent the approximate amount of realized and unrealized gains (losses) recognized in earnings on commodity derivative contracts and interest rate swap agreements for the three and six months ended March 31, 2021 and 2020 and the fair value of these derivatives as of March 31, 2021 and September 30, 2020 (in thousands):

For the Three Months Ended March 31, 2021 (unaudited) For the Six Months Ended March 31, 2021 (unaudited)

Change in Change in

3 unchanged sentences

Total $ ( 74 ) $ 1,213 $ 1,139 $ ( 393 ) $ 2,377 $ 1,984

December 31, 2020 September 30, 2020

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

Change in Change in

Income Statement Classification Realized Gain (Loss) Unrealized Gain (Loss) Total Gain (Loss) Realized Gain (Loss) Unrealized Gain (Loss) Total Gain (Loss)

Cost of revenues $ ( 21 ) $ ( 797 ) $ ( 818 ) $ ( 21 ) $ ( 797 ) $ ( 818 )

Interest expense, net ( 24 ) ( 1,532 ) ( 1,556 ) ( 49 ) ( 1,466 ) ( 1,515 )

Total $ ( 45 ) $ ( 2,329 ) $ ( 2,374 ) $ ( 70 ) $ ( 2,263 ) $ ( 2,333 )

March 31, 2021 September 30, 2020

Balance Sheet Classification (unaudited)

6 unchanged sentences

Note 16 - Fair Value Measurements

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

December 31, 2020 September 30, 2020

The following table presents the Company’s assets and liabilities measured at fair value on a recurring basis as of March 31, 2021 and September 30, 2020 under ASC 820 (in thousands):

March 31, 2021 September 30, 2020

Level 2 Level 2

5 unchanged sentences

Note 17 - Purchase Commitments

As of December 31, 2020, the Company had unconditional purchase commitments for diesel fuel in the normal course of business in the aggregate amount of $ 0.9 million.

As of December 31, 2020, the Company’s purchase commitments for the remainder of fiscal year 2021 and annually thereafter were as follows (unaudited in thousands):

Fiscal Year Amount

As of March 31, 2021, the Company had unconditional purchase commitments for diesel fuel in the normal course of business in the aggregate amount of $ 0.6 million.

As of March 31, 2021, the Company’s purchase commitments for the remainder of fiscal year 2021 and annually thereafter were as follows (in thousands):

Fiscal Year Amount (unaudited)

Remainder of 2021 $ 530

1 unchanged sentence

The Company is closely monitoring the impact of the COVID-19 pandemic 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 from COVID-19 during the three months ended December 31, 2020, 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 19 - Subsequent Events

Restricted Stock Award

On January 4, 2021, the Company awarded a total of 10,000 restricted shares of Class A common stock to an executive officer under the 2018 Equity Plan.

The grant is classified as an equity award.

The aggregate grant date fair value of this restricted stock award was $ 0.3 million.

The shares of restricted stock vest as follows:

one-fourth on January 4, 2021, one-fourth on January 4, 2022, one-fourth on January 4, 2023 and one-fourth on January 4, 2024.

Conversion of Class B Common Stock to Class A Common Stock

On January 19, 2021, certain stockholders of the Company converted a total of 148,621 shares of Class B common stock into shares of Class A common stock on a one -for-one basis.

Following the conversion, there were 34,034,505 shares of Class A common stock and 17,757,240 shares of Class B common stock outstanding.

While the Company did not incur significant disruptions in its operations from the COVID-19 pandemic during the three and six months ended March 31, 2021, due to the uncertainties surrounding the COVID-19 pandemic, it is unable to predict the impact that the COVID-19 pandemic will have on its financial position, operating results and cash flows in future periods.

Note 19 - Legal Proceedings

From time to time, we are subject to various legal proceedings, regulatory matters or fines that arise in the ordinary course of business.

We accrue a liability when management believes that it is probable that a liability has been incurred and that the amount of liability can be reasonably estimated.

Subsequent to March 31, 2021, the Company entered into a settlement agreement with a former stockholder of the Company relating to claims arising out of the former stockholder’s sale of shares of the Company’s common stock in a private transaction prior to the Company's initial public offering.

Under the settlement agreement, the Company will pay $ 3.2 million to the former stockholder in exchange for a release of all claims made by the former stockholder against the Company in the arbitration proceeding.

As a result of the parties’ entry into the settlement agreement, the Company has determined that liabilities associated with the arbitration proceeding, including the settlement amount, were probable and could be reasonably estimated as of March 31, 2021.

Accordingly, the Company accrued $ 3.2 million for the settlement payment as of March 31, 2021, which amount is included in accrued expenses and other current liabilities in the Consolidated Balance Sheets and general and administrative expenses in the Consolidated Statements of Income included in this report.

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