What changed in this filing

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Item 1. Financial Statements

2021-08-06 compared with 2021-05-07 · 129 added, 103 removed, 491 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, 2021 and September 30, 2020 and no shares issued and outstanding

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

Class A common stock, par value $ 0.001 ;

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

400,000,000 shares authorized, 36,506,570 shares issued and outstanding at June 30, 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, 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

100,000,000 shares authorized, 18,708,860 shares issued and 15,785,908 outstanding at June 30, 2021 and 20,828,813 shares issued and 17,905,861 outstanding at September 30, 2020

Additional paid-in capital 247,224 245,022

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,

2021 2020 2021 2020

7 unchanged sentences

Other income (expense) 252 251 661 360

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

Income before provision for income taxes and earnings from investment in joint venture 13,941 20,100 18,033 28,835

Provision for income taxes ( 4,600 ) ( 4,772 ) ( 5,767 ) ( 6,622 )

Earnings from investment in joint venture — 70 11 113

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

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

Earnings (loss) from investment in joint venture ( 1 ) 419 10 532

Net income $ 9,340 $ 15,747 $ 12,276 $ 22,745

Net income per share attributable to common stockholders:

Basic $ 0.18 $ 0.31 $ 0.24 $ 0.44

7 unchanged sentences

(unaudited in thousands, except share data)

For the six months ended March 31, 2021

For the nine months ended June 30, 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

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

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

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

2 unchanged sentences

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

Net income — — — — — — 9,340 9,340

Conversion of Class B common stock to Class A common stock 787,001 1 ( 787,001 ) ( 1 ) — — — —

Equity-based compensation expense — — — — 1,347 — — 1,347

June 30, 2021 36,506,570 $ 36 18,708,860 $ 19 $ 247,224 $ ( 15,603 ) $ 167,997 $ 399,673

For the nine months ended June 30, 2020

Class A Common Stock Class B Common Stock Additional

13 unchanged sentences

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

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

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:

9 unchanged sentences

Distribution of earnings from investment in joint venture 100 139

Deferred income taxes — ( 197 )

Other non-cash adjustments ( 57 ) ( 12 )

19 unchanged sentences

Repayments of long-term debt ( 92,850 ) ( 26,874 )

Net cash (used in) provided by financing activities ( 6,500 ) 15,483

Net cash provided by financing activities 106,348 15,845

Net change in cash and cash equivalents ( 13,848 ) ( 1,924 )

10 unchanged sentences

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

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

Amounts payable to sellers in business combinations $ 1,296 $ —

See notes to consolidated financial statements (unaudited).

73 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 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.

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

Projects performed for various Departments of Transportation accounted for 35.9 % and 36.8 % of consolidated revenues for the three months ended June 30, 2021 and 2020, respectively, and for 30.7 % and 32.3 % of consolidated revenues for the nine months ended June 30, 2021 and 2020, respectively.

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

% of Consolidated Revenues

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

2021 2020 2021 2020

Alabama Department of Transportation 10.9 % 13.2 % 9.3 % 11.1 %

North Carolina Department of Transportation 12.2 % 9.0 % 8.7 % 8.4 %

Revenues from Contracts with Customers

4 unchanged sentences

% 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,

2021 2020 2021 2020

11 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).

48 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, 2021 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 March 31, 2021 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.

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

The Company 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

3 unchanged sentences

The acquired businesses added thirteen HMA plants in central and eastern North Carolina, providing the Company with access to additional markets and expanding its footprint in the state.

On June 22, 2021, a subsidiary of the Company acquired a grading and site work company in Wilson, North Carolina, complementing other recent acquisitions in the state and further enhancing the Company's vertical integration of construction services across multiple markets in North Carolina.

The acquisitions were accounted for as business combinations in accordance with ASC 805.

2 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 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,

For these acquisitions, total consideration is $ 93.6 million, of which $ 92.3 million has been paid with cash on hand as of June 30, 2021.

The total consideration has been provisionally allocated as follows:

$ 4.2 million of inventory, $ 56.6 million of property, plant and equipment, $ 32.1 million of goodwill, and $ 0.7 million of other intangibles, which are expected to be deductible for income tax purposes.

Included in total consideration is a payable to sellers of $ 1.3 million for purchase price adjustments, which is included in accounts payable at June 30, 2021.

The Consolidated Statements of Income includes $ 31.4 million of revenue and $( 1.0 ) million of net loss attributable to the operations of these acquisitions for the three months ended June 30, 2021 and $ 50.7 million of revenue and $( 4.2 ) million of net loss attributable to the operations of these acquisitions for the nine months ended June 30, 2021 from their respective acquisition dates.

Results of Operations of Acquisitions Completed Subsequent to June 30, 2020

Unaudited consolidated pro forma revenues and net income, as if acquisitions completed by the Company subsequent to June 30, 2020 (including those described above) had been completed as of October 1, 2019 are as follows (in thousands):

For the Three Months Ended June 30,

Pro forma revenues $ 268,401 $ 255,186

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

For the Six Months Ended March 31,

Pro forma net income $ 9,785 $ 15,192

For the Nine Months Ended June 30,

Pro forma revenues $ 669,616 $ 657,461

Pro forma net income $ 13,961 $ 20,936

Pro forma information is presented for informational purposes and may not be indicative of revenue that would have been achieved if the acquisitions had actually been completed as of October 1, 2019.

Pro forma information is presented for informational purposes and may not be indicative of revenue or net income that would have been achieved if the acquisitions had actually been completed as of October 1, 2019.

Note 5 - Contracts Receivable Including Retainage, net

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 including retainage, net consisted of the following at June 30, 2021 and September 30, 2020 (in thousands):

June 30, 2021 September 30, 2020

Contracts receivable $ 137,958 $ 112,197

5 unchanged sentences

Note 6 - Contract Assets and Liabilities

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

June 30, 2021 September 30, 2020

Costs on uncompleted contracts $ 979,380 $ 876,229

3 unchanged sentences

Net billings in excess of costs and estimated earnings on uncompleted contracts $ ( 15,785 ) $ ( 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 March 31, 2021 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 7,897 2,149 10,046

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.

June 30, 2021 (unaudited) $ 15,770 $ ( 31,555 ) $ ( 15,785 )

At June 30, 2021, the Company had unsatisfied or partially unsatisfied performance obligations under construction project contracts representing approximately $ 627.5 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 $ 282.3 million during the remainder of the fiscal year ending September 30, 2021 and $ 345.2 million thereafter.

Note 7 - Property, Plant and Equipment

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

March 31, 2021 September 30, 2020

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

June 30, 2021 September 30, 2020

Construction equipment $ 301,821 $ 253,157

9 unchanged sentences

Total property, plant and equipment, net $ 296,697 $ 237,230

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.

Depreciation and depletion expense related to property, plant and equipment was $ 12.4 million and $ 10.0 million for the three months ended June 30, 2021 and 2020, respectively, and $ 35.6 million and $ 28.9 million for the nine months ended June 30, 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 March 31, 2021 and September 30, 2020 consisted of the following (in thousands):

March 31, 2021 September 30, 2020

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

June 30, 2021 September 30, 2020

Long-term debt:

5 unchanged sentences

Long-term debt, net of current maturities $ 188,591 $ 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”).

The Credit Agreement provides for a term loan (the “Term Loan”) and a $ 50.0 million revolving credit facility (the “Revolving Credit Facility”).

Since June 24, 2021, the Company and each of its subsidiaries have been parties to a Second Amended and Restated Credit Agreement with BBVA USA, as administrative agent, joint lead arranger, sole bookrunner and lender, Regions Bank and BofA Securities, Inc., each as a joint arranger, and certain other lenders (as amended and restated, the “Credit Agreement”).

The Credit Agreement provides for a term loan in an initial aggregate principal amount of $ 200 million (the “Term Loan”) and a revolving credit facility in an initial aggregate principal amount of $ 225 million (the “Revolving Credit Facility”).

Among other things, the proceeds of the Term Loan were used to refinance indebtedness of the Company and its subsidiaries under its prior credit facility.

The Term Loan, inclusive of any incremental borrowings made in the form of a term loan, will amortize in quarterly installments commencing on September 30, 2021 in an amount (subject, in each case, to adjustments for prior mandatory and voluntary prepayments of principal) equal to:

(a) 1.25 % of the original principal amount of the Term Loan on September 30, 2021 and on each of the following eleven quarter-end payment dates, and (b) 1.875 % of the original principal amount of the Term Loan on each of the next seven quarter-end payment dates.

The annual interest rates applicable to advances will be 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 net leverage ratio.

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

All outstanding advances under the Term Loan and Revolving Credit Facility are due and payable in full on June 24, 2026.

Subject to various requirements, the Company generally may (and, under certain circumstances, must), 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 Company and its subsidiaries under the Credit Agreement are secured by a first priority security interest in substantially all of the Company’s assets.

Following an amendment and restatement of the Credit Agreement in July 2020, the principal amount of Term Loan advances made prior to April 30, 2020 is repaid in quarterly installments of $ 2,050,000 , and the principal amount of Term Loan advances made on or after April 30, 2020 is 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 is due and payable on the last business day of each month.

In addition, the Company and its subsidiaries 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.

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.

Note 9 - Equity

7 unchanged sentences

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.

During the three months ended June 30, 2021, certain stockholders of the Company converted a total of 787,001 shares of Class B common stock into shares of Class A common stock on a one -for-one basis.

As of June 30, 2021, there were 36,506,570 shares of Class A common stock and 15,785,908 shares of Class B common stock outstanding.

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.

During the nine months ended June 30, 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”).

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

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

2021 2020 2021 2020

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 (unaudited 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,

2021 2020 2021 2020

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, 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.

The Company’s effective income tax rate for the three months ended June 30, 2021 and 2020 was 33.0 % and 23.3 %, respectively.

The Company’s effective tax rate for the nine months ended June 30, 2021 and 2020 was 32.0 % and 22.5 %, respectively.

The effective income tax rate for the three and nine months ended June 30, 2021 was unfavorably impacted by a non-deductible legal settlement and related legal expenses, as described in Note 19 - Legal Proceedings.

Note 12 - Related Parties

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 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.

At June 30, 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.

At June 30, 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.

5 unchanged sentences

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.

8 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 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):

The following table presents revenues earned and expenses incurred by the Company during the three and nine months ended June 30, 2021 and 2020, and accounts receivable and payable balances at June 30, 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 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,

2021 2020 2021 2020 2021 2020

12 unchanged sentences

(2) Cost is reflected as general and administrative expenses on the Company’s Consolidated Statements of Income.

(3) Purchases reflected in property, plant & equipment, net, on the Company's Consolidated Balance Sheets.

(3) Purchases reflected in property, plant and equipment, net, on the Company's Consolidated Balance Sheets.

Note 13 - Equity-Based Compensation

2 unchanged sentences

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

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 three and nine months ended June 30, 2021, the Company recorded compensation expense in connection with these grants in the amount of $ 0.3 million and $ 1.0 million, respectively, which is reflected as general and administrative expenses in the Company’s Consolidated Statements of Income.

At June 30, 2021, there was approximately $ 0.7 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.

1 unchanged sentence

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.

During the three and nine months ended June 30, 2021, the Company recorded compensation expense in connection with these grants in the amount of $ 1.0 million and $ 1.2 million, respectively, which is reflected as general and administrative expenses in the Company’s Consolidated Statements of Income.

At June 30, 2021, there was approximately $ 12.4 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:

3 unchanged sentences

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

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.

As of June 30, 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 $ 6.7 million, $ 1.5 million and $ 5.3 million, respectively.

As of June 30, 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 March 31,

For the Three Months Ended June 30,

(unaudited) (unaudited)

2 unchanged sentences

Total lease expense $ 4,325 $ 4,104

For the Six Months Ended March 31,

For the Nine Months Ended June 30,

(unaudited) (unaudited)

4 unchanged sentences

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.

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 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):

As of June 30, 2021, the weighted-average remaining term of the Company’s leases was 9.2 years, and the weighted-average discount rate was 3.89 %.

As of June 30, 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 June 30, 2021 (in thousands):

Fiscal Year Amount (unaudited)

7 unchanged sentences

however, certain agreements have minimum annual payments.

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.

Royalty expense recorded in cost of revenue was $ 0.3 million for the three months ended June 30, 2021 and 2020 and $ 0.7 million and $ 0.8 million for the nine months ended June 30, 2021 and 2020, respectively.

Note 15 - Investment in Derivative Instruments

3 unchanged sentences

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)

At June 30, 2021, the aggregate notional value of these interest rate swap agreements was $ 40.3 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 nine months ended June 30, 2021 and 2020 and the fair value of these derivatives as of June 30, 2021 and September 30, 2020 (in thousands):

For the Three Months Ended June 30, 2021 (unaudited) For the Nine Months Ended June 30, 2021 (unaudited)

Change in Change in

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Total $ 139 $ 764 $ 903 $ ( 254 ) $ 3,141 $ 2,887

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

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

Change in Change in

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

March 31, 2021 September 30, 2020

June 30, 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 March 31, 2021 and September 30, 2020 under ASC 820 (in thousands):

March 31, 2021 September 30, 2020

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

June 30, 2021 September 30, 2020

Level 2 Level 2

5 unchanged sentences

Note 17 - Purchase Commitments

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):

As of June 30, 2021, the Company had unconditional purchase commitments for diesel fuel in the normal course of business in the aggregate amount of $ 0.2 million.

As of June 30, 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)

2 unchanged sentences

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 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.

While the Company did not incur significant disruptions in its operations from the COVID-19 pandemic during the three and nine months ended June 30, 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.

On April 26, 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 paid $ 3.2 million to the former stockholder in two installments in exchange for a release of all claims made by the former stockholder against the Company in the arbitration proceeding.

As of June 30, 2021, $ 1.7 million of the remaining settlement payment was included in accrued expenses and other current liabilities in the Consolidated Balance Sheets.

The aforementioned settlement and associated legal expenses were determined to be non-deductible expenses, which resulted in an unfavorable permanent tax difference for the three and nine months ended June 30, 2021.

Note 20 - Subsequent Events

Alabama Acquisition

On July 30, 2021, a subsidiary of the Company acquired the operations of an HMA production and paving company and its affiliated aggregates company headquartered in Cullman, Alabama.

As a result of the acquisition, the Company added four HMA plants, four aggregate facilities, and a diverse fleet of trucks and construction equipment to support its operations in central and northern Alabama.

North Carolina Acquisition

On August 2, 2021, a subsidiary of the Company acquired a crushed stone and aggregates facility located near Goldston, North Carolina.

The purchase enhanced the Company’s vertical integration strategy of construction materials to support its HMA production operations.

The Company expects to use the aggregates mined from this facility to supply multiple HMA plants that the Company acquired during the first quarter of fiscal 2021.

Both acquisitions will be accounted for as business combinations in accordance with ASC 805.

The combined purchase price of $ 112.9 million (exclusive of consideration to the seller for inventory assets acquired at the Goldston, North Carolina facility) was paid from cash on hand at closing.

In each case, 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 above in Note 2 - Significant Accounting Policies.

The amount of the purchase price exceeding the preliminary net fair value of identifiable assets acquired and liabilities assumed is expected to be recorded as goodwill, which is deductible for income tax purposes.

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

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