What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2021-11-29 compared with 2020-12-11 · 494 added, 267 removed, 763 unchanged (50% of the section changed)

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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm

Consolidated Balance Sheets at September 30, 2020 and September 30, 2019

Consolidated Statements of Income for the fiscal years ended September 30, 2020 and September 30, 2019

Consolidated Statements of Stockholders’ Equity for the fiscal years ended September 30, 2020 and September 30, 2019

Consolidated Statements of Cash Flows for the fiscal years ended September 30, 2020 and September 30, 2019

Report s of Independent Registered Public Accounting Firm

Consolidated Balance Sheets at September 30, 2021 and 2020

Consolidated Statements of Comp rehensive Income for the fiscal years ended September 30, 2021, 2020, and 2019

Consolidated Statements of Stockholders’ Equity for the fiscal years ended September 30, 2021, 2020, and 2019

Consolidated Statements of Cash Flows for the fiscal years ended September 30, 2021, 2020, and 2019

Notes to Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders of Construction Partners, Inc.:

To the Stockholders and the Board of Directors of Construction Partners, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Construction Partners, Inc.

and its subsidiaries (the Company) as of September 30, 2020 and 2019, the related consolidated statements of income, stockholders’ equity and cash flows for the years then ended, and the related notes to the consolidated financial statements (collectively, the financial statements).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of September 30, 2020 and 2019, and the results of their operations and their cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

and its subsidiaries (the Company) as of September 30, 2021 and 2020, the related consolidated statements of comprehensive income, stockholders' equity and cash flows for each of the three years in the period ended September 30, 2021, and the related notes to the consolidated financial statements (collectively, the financial statements).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of September 30, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended September 30, 2021, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of September 30, 2021, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013, and our report dated November 29, 2021 expressed an unqualified opinion on the effectiveness of the Company's internal control over financial reporting.

Basis for Opinion

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Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with U.S.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

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We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing a separate opinion on the critical audit matters or on the accounts or disclosures to which they relate.

Revenue Recognition – Revenue Recognized Over Time Under Uncompleted Long-Term Construction Contracts

Critical Audit Matter Description

As described in Note 6, the Company has recognized $1,168,864,000 of costs and estimated earnings to date on uncompleted contracts at September 30, 2021.

As described in Note 1 to the consolidated financial statements, the Company recognizes revenue derived from long-term construction contracts over time as the Company satisfies the single performance obligation for each construction contract.

Progress towards completion of the performance obligation in each long-term construction project is estimated using the input method, which is measured by the relationship of total costs incurred through the measurement date to total estimated costs required to complete the project (cost-to-cost input method).

Recognition of revenue under uncompleted construction contracts requires significant judgment by management, including measuring progress towards completion of the contract by estimating total costs expected to be incurred to complete a contract.

We have identified the revenue recognized under long-term construction contracts that were uncompleted at September 30, 2021 as a critical audit matter because of the significant assumptions management makes in determining the amount of revenue to recognize prior to completion of a contract.

Auditing management’s judgments related to measuring progress towards completion of the Company’s contracts through estimating total costs expected to be incurred to complete the contracts involved a high degree of auditor judgment and increased audit effort.

Our audit procedures related to revenue recognized under uncompleted long-term construction contracts included the following, among others:

• We obtained an understanding of the relevant controls related to revenue recognized under long-term construction contracts and tested such controls for design and operating effectiveness, including management’s controls over the estimation of total contract costs to be incurred in order to complete uncompleted contracts.

• We selected a sample of long-term construction contracts and we performed the following:

◦ Compared the current year costs incurred to prior year estimates of costs to complete, which involved comparing projects completed during the fiscal year with the estimates made as of the previous balance sheet date to evaluate management’s ability to accurately estimate costs to complete on its long-term construction contracts.

◦ Analyzed the estimated gross margins for uncompleted contracts by comparing the Company’s three-year historical average gross margin stratified by customer type to the estimated margin for uncompleted contracts at fiscal year end.

◦ Inquired with individuals outside of the accounting function, including project management teams and individuals responsible for oversight and performance of the contracts, to obtain corroborating evidence regarding estimates of costs to complete and estimated gross margins on uncompleted contracts.

• Compared the costs incurred during the month immediately subsequent to the fiscal year end to costs and estimated earnings to date on uncompleted contracts at September 30, 2021, and on a sample basis, inquired with individuals responsible for oversight and performance of the contracts in order to obtain corroborating evidence regarding estimated earnings on uncompleted contracts.

Fair Value Estimation of Mineral Reserves Acquired in Business Combinations

Critical Audit Matter Description

As described in Note 4 to the consolidated financial statements, during the fiscal year ended September 30, 2021, the Company acquired a crushed stone and aggregates facility located near Goldston, North Carolina and a HMA contracting company located in Cullman, Alabama that includes four aggregate facilities, resulting in a total provisional fair value of acquired mineral reserves of $56,718,000.

The Company accounted for these transactions as business acquisitions with the identifiable assets acquired and liabilities assumed recorded at their provisional estimated fair values.

As described in Note 2 to the consolidated financial statements, the Company estimated the provisional fair values of acquired mineral reserves using an excess earnings approach, which required management to make significant estimates and assumptions related to forecasted sales prices, forecasted sales volumes, forecasted profit margins and the selection of a discount rate.

We have identified the provisional fair value of mineral reserves acquired in business combinations as a critical audit matter because of the significant estimates and assumptions management used in estimating the provisional fair values.

Auditing management’s key estimates and assumptions involved a high degree of auditor judgment and increased audit effort, including the use of our valuation specialists.

Our audit procedures related to the provisional fair value of mineral reserves acquired in business combinations included the following, among others:

• We obtained an understanding of the relevant controls related to selecting key assumptions and inputs inherent in the fair value estimation valuation models and tested such controls for design and operating effectiveness.

• We involved valuation professionals with specialized skills and knowledge, who assisted in the following:

◦ Evaluating the elements of the discount rate assumption used by management by comparing them against publicly available market data

◦ Evaluating the forecasted sales prices, forecasted sales volumes, forecasted profit margins by comparing management’s estimates to market data

/s/ RSM US LLP

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Birmingham, Alabama

December 11, 2020

November 29, 2021

Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors of Construction Partners, Inc.

Opinion on the Internal Control Over Financial Reporting

We have audited Construction Partners, Inc.'s (the Company) internal control over financial reporting as of September 30, 2021, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of September 30, 2021, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements of the Company and our report dated November 29, 2021 expressed an unqualified opinion.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting in the accompanying Management’s Report on Internal Control Over Financial Reporting.

Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.

Our audit also included performing such other procedures as we considered necessary in the circumstances.

We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company's assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ RSM US LLP

Birmingham, Alabama

November 29, 2021

CONSTRUCTION PARTNERS, INC.

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Long-term liabilities:

Long-term debt, net of current maturities 79,053 42,458

Long-term debt, net of current maturities and debt issuance costs 206,175 79,053

Operating lease liabilities, net of current portion 5,302 5,554

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( 15,603 ) ( 15,603 )

Accumulated other comprehensive loss, net ( 23 ) —

Retained earnings 175,898 155,721

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CONSTRUCTION PARTNERS, INC.

CONSOLIDATED STATEMENTS OF INCOME

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands, except share and per share data)

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September 30,

2021 2020 2019

Revenues $ 910,739 $ 785,679 $ 783,238

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Net income $ 20,177 $ 40,297 $ 43,121

Other comprehensive (loss), net of tax

Unrealized (loss) on interest rate swap contract, net ( 23 ) — —

Other comprehensive (loss) ( 23 ) — —

Comprehensive income $ 20,154 $ 40,297 $ 43,121

Net income per share attributable to common stockholders:

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Capital Treasury

Stock Retained

Stock Accumulated Other Comprehensive (Loss), net Retained

Earnings Total

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Equity-based compensation expense — — — — 1,570 — — — 1,570

Effect of adopting ASU Topic 842 (see Note 3) — — — — — — ( 222 ) ( 222 )

Effect of adopting ASU Topic 842 — — — — — — — ( 222 ) ( 222 )

Net income — — — — — — — 40,297 40,297

Balance, September 30, 2020 33,875,884 34 20,828,813 21 245,022 ( 15,603 ) — 155,721 385,195

Conversion of Class B common stock to Class A common stock 2,214,022 2 ( 2,214,022 ) ( 2 ) — — — — —

Issuance of stock grant awards 510,733 1 — — — — — — 1

Equity-based compensation expense — — — — 3,549 — — — 3,549

Other comprehensive (loss) — — — — — — ( 23 ) — ( 23 )

Net income — — — — — — — 20,177 20,177

Balance, September 30, 2021 36,600,639 $ 37 18,614,791 $ 19 $ 248,571 $ ( 15,603 ) $ ( 23 ) $ 175,898 $ 408,899

See notes to consolidated financial statements.

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(in thousands)

For the Fiscal Year

Ended September 30,

For the Fiscal Year Ended September 30,

2021 2020 2019

Cash flows from operating activities:

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Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation, depletion and amortization of long-lived assets 39,301 31,231

Depreciation, depletion, accretion and amortization 49,806 39,301 31,231

Amortization of deferred debt issuance costs 275 170 109

Loss on derivative instruments 1,900 565

Unrealized loss (gain) on derivative instruments ( 3,209 ) 1,900 565

Provision for bad debt 784 705 995

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Changes in operating assets and liabilities:

Contracts receivable including retainage, net 7,407 ( 20,586 )

Contracts receivable including retainage ( 27,074 ) 7,407 ( 20,586 )

Costs and estimated earnings in excess of billings on uncompleted contracts ( 15,150 ) 4,157 ( 2,696 )

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Business acquisitions, net of cash acquired ( 210,734 ) ( 30,191 ) ( 13,854 )

Distributions received from investment in joint venture 361 2,500

Return of investment in joint venture — 361 2,500

Net cash used in investing activities ( 263,412 ) ( 79,363 ) ( 60,225 )

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Cash and cash equivalents:

Beginning of period 80,619 99,137

End of period $ 148,316 $ 80,619

Beginning of year 148,316 80,619 99,137

End of year $ 57,251 $ 148,316 $ 80,619

Supplemental cash flow information:

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Property, plant and equipment financed with accounts payable $ 3,408 $ 2,761 $ 904

Amounts payable to sellers in business combinations $ 1,457 $ — $ —

Non-compete agreements to seller in business combination $ 1,200 $ — $ —

See notes to consolidated financial statements.

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Through its wholly owned subsidiaries, the Company provides a variety of products and services to both public and private infrastructure projects, with an emphasis on highways, roads, bridges, airports, and commercial and residential developments.

The Company’s primary operations consist of (i) manufacturing and distributing hot mix asphalt (“HMA”) for both internal use and sales to third parties in connection with construction projects, (ii) paving activities, including the construction of roadway base layers and application of asphalt pavement, (iii) site development, including the installation of utility and drainage systems, (iv) mining aggregates, such as sand and gravel, that are used as raw materials in the production of HMA, and (v) distributing liquid asphalt cement for both internal use and sales to third parties in connection with HMA production.

The Company was formed as a Delaware corporation in 2007 as a holding company for its wholly owned subsidiary, Construction Partners Holdings, Inc., to facilitate an acquisition growth strategy in the HMA paving and construction industry.

On December 31, 2019, Construction Partners Holdings, Inc.

merged with and into the Company, with the Company surviving the merger.

The Company’s primary operations consist of (i) manufacturing and distributing hot mix asphalt (“HMA”) for both internal use and sales to third parties in connection with construction projects, (ii) paving activities, including the construction of roadway base layers and application of asphalt pavement, (iii) site development, including the installation of utility and drainage systems, (iv) mining aggregates, such as sand, gravel and construction stone, that are used as raw materials in the production of HMA and for sales to third parties, and (v) distributing liquid asphalt cement for both internal use and sales to third parties in connection with HMA production.

The Company was formed as a Delaware corporation in 2007 as a holding company to facilitate an acquisition growth strategy in the HMA paving and construction industry.

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

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The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the recorded amounts of assets, liabilities, stockholders’ equity, revenues and expenses during the reporting period, and the disclosure of contingent liabilities at the date of the consolidated financial statements.

Estimates are used in accounting for items such as recognition of revenues and cost of revenues, goodwill and other intangible assets, business acquisition accounting estimates, valuation of operating lease right-of-use assets, allowance for doubtful accounts, valuation allowances related to income taxes, accruals for potential liabilities related to lawsuits or insurance claims, the fair value of derivative instruments and the fair value of equity-based compensation awards.

Estimates are used in accounting for items such as recognition of revenues and cost of revenues, mineral reserves, goodwill and other intangible assets, business acquisition accounting estimates, valuation of operating lease right-of-use assets, allowance for doubtful accounts, valuation allowances related to income taxes, accruals for potential liabilities related to lawsuits or insurance claims, asset retirement obligations, the fair value of derivative instruments, the fair value of equity-based compensation awards and the economic implications of the COVID-19 pandemic.

Estimates are continually evaluated based on historical information and actual experience;

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All inter-company balances and transactions have been eliminated in consolidation.

Emerging Growth Company

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

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

Cash and Cash Equivalents

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

It is common in the Company’s industry for a small portion of either

progress billings or the contract price, typically 10%, to be withheld by the customer until the Company completes a project to the satisfaction of the customer in accordance with the applicable contract terms.

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.” 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 is stated at the amount management expects to collect from outstanding balances.

and other information available to management.

Contract Assets and Contract Liabilities

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Projects performed for various departments of transportation accounted for 33.7 %, 32.5 % and 40.4 % of consolidated revenues for the fiscal years ended September 30, 2021, 2020 and 2019, respectively.

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

% of Consolidated

for the Fiscal

Customers that accounted for more than 10% of consolidated revenues during fiscal years ended September 30, 2021, 2020 and 2019 are presented below:

% of Consolidated Revenues for the Fiscal

Year Ended September 30,

2021 2020 2019

Alabama Department of Transportation 10.8 % 11.6 % 13.8 %

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The cost of inventory includes the cost of material, labor, trucking and other equipment costs associated with procuring and transporting materials to HMA plants for production and delivery to customers.

Inventories consist primarily of raw materials, including asphalt cement, aggregate and millings that the Company expects to utilize on construction projects within one year.

Inventories consist primarily of construction stone that has been removed from aggregates facilities and processed for future sale or internal use, raw materials, including asphalt cement, aggregates and millings that the Company expects to utilize on construction projects within one year.

Inventories valued on the average cost basis totaled $ 46.1 million and $ 33.7 million, respectively, at September 30, 2021 and 2020.

Inventories valued on the first-in, first-out cost basis totaled $ 7.6 million and $ 4.8 million, respectively, at September 30, 2021 and 2020.

Revenues from Contracts with Customers

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

% of Consolidated

for the Fiscal

% of Consolidated Revenues for the Fiscal

Year Ended September 30,

2021 2020 2019

Public 61.3 % 65.3 % 69.3 %

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Management reviews contract estimates regularly to assess revisions of estimated costs to complete a project and measurement of progress toward completion.

During the fiscal years ended September 30, 2020 and 2019, revisions in estimates related to amounts recorded in prior periods resulted in the Company recording net increases in revenues of $ 1.6 million and $ 3.8 million, respectively.

No material adjustments to a contract were noted in the fiscal year ended September 30, 2021.

Management believes the Company maintains reasonable estimates based on prior experience;

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Each of the Company’s construction contracts represents a single performance obligation to complete a defined construction project.

This is because goods and services promised for

delivery to a customer are not distinct, as the customer cannot benefit from any individual portion of the services on its own.

This is because goods and services promised for delivery to a customer are not distinct, as the customer cannot benefit from any individual portion of the services on its own.

All deliverables under a contract are part of a project defined by a customer and represent a series of integrated goods and services that have the same pattern of delivery to the customer and use the same measure of progress toward satisfaction of the performance obligation as the customer’s asset is created or enhanced by the Company.

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Revenue recognized during a reporting period is based on the cost-to-cost input method applied to the total transaction price, including adjustments for variable consideration, such as liquidated damages, penalties or bonuses, related to the timeliness or quality of project performance.

The Company includes variable consideration in the estimated transaction price at the most likely amount to which the Company expects to be entitled or the most likely amount the Company expects to incur, in the case of liquidated damages or penalties.

The Company includes variable consideration in the estimated transaction price at the most likely amount to which the

Company expects to be entitled or the most likely amount the Company expects to incur, in the case of liquidated damages or penalties.

Such amounts are included in the transaction price for which it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty is resolved.

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

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

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

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

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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 September 30, 2020 and 2019.

The Company’s financial instruments include cash and cash equivalents, contracts receivable including retainage, accounts payable and accrued expenses reflected as current assets and current liabilities on its Consolidated Balance Sheets at September 30, 2021 and 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 11 - 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 September 30, 2020 and 2019.

The Company also has a Term Loan and a Revolving Credit Facility, as described in Note 11 - 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 long-term debt on the Company’s Consolidated Balance Sheets at September 30, 2021 and 2020.

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

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The fair value of commodity and interest rate swaps are based on forward and spot prices, as described in Note 21 - Fair Value Measurements.

Management applies fair value measurement guidance to its impairment analysis for tangible and intangible assets.

Level 3 fair values are used to value acquired mineral reserves and leased mineral interests.

The fair values of mineral reserves and leased mineral interests are determined using an excess earnings approach, which requires management to estimate future cash flows.

The estimate of future cash flows is based on available historical information and forecasts determined by management, but is

inherently uncertain.

Key assumptions in estimating future cash flows include sales price, volumes and expected profit margins, net of capital requirements.

The present value of the projected net cash flows represents the fair value assigned to mineral reserves and mineral interests.

The discount rate is a significant assumption used in the valuation model and is based on the required rate of return that a hypothetical market participant would assume if purchasing the acquired business.

Management applies fair value measurement guidance to its impairment analysis for tangible and intangible assets, including goodwill.

Property, Plant and Equipment

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Leasehold improvements for operating leases are amortized over the lesser of the term of the related lease or the estimated useful lives of the improvements.

Quarry reserves are depleted in accordance with the units-of-production method as aggregate is extracted, using the initial allocation of cost based on proven and probable reserves.

Mineral reserves and mine development costs, including stripping costs incurred during the development stage of a mine, are depleted in accordance with the units-of-production method as aggregates are extracted, using the initial allocation of cost based on proven and probable reserves.

Routine repair and maintenance costs are expensed as incurred.

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improvements, 15 - 25 years

Quarry reserves Based on depletion

Mineral reserves Based on depletion

Buildings 5 - 39 years

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If the analysis warrants a change in the estimated useful life of property, plant and equipment, management will reduce the estimated useful life and depreciate, deplete or amortize the carrying value prospectively over the shorter remaining useful life.

The carrying amounts of assets sold or retired and the related accumulated depreciation are eliminated in the period of disposal, and the resulting gains and losses are included in the Company’s Consolidated Statements of Income during the same period.

Impairment of Long-Lived Assets

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If indicators of potential impairment are present, management performs a recoverability test and, if necessary, records an impairment loss.

If the total estimated future undiscounted cash flows to be generated from the use and ultimate disposition of an asset or asset group is less than its carrying value, an impairment loss is recorded in the Company’s Consolidated Statements of Income, measured as the amount required to reduce the carrying value to fair value.

If the total estimated future undiscounted cash flows to be generated from the use and ultimate disposition of an asset or asset group is less than its carrying value, an impairment loss is recorded in the Company’s Consolidated Statements of Comprehensive Income, measured as the amount required to reduce the carrying value to fair value.

Fair value is determined in accordance with the best available information based on the hierarchy described under “Fair Value Measurements” above.

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If the fair value of the respective reporting unit exceeds its carrying amount, goodwill is not considered to be impaired, and no further testing is required.

If the carrying amount of a reporting unit exceeds its fair value, an impairment charge is recorded to write down goodwill to its fair value and is recorded in the Company’s Consolidated Statements of Income.

The Company performed a quantitative assessment of goodwill using the market capitalization calculation for fiscal years 2021 and 2020 and determined that the fair value of its reporting unit exceeded its carrying value, and thus concluded that the carrying value of goodwill was not impaired at September 30, 2021 or 2020.

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Management also annually assesses the carrying value of the Company’s indefinite-lived intangible assets other than goodwill on the first day of the fiscal fourth quarter.

Management tests indefinite-lived intangible assets for impairment by comparing their carrying value to their estimated fair value.

An impairment loss is recorded in the Company’s Consolidated Statements of Income to the extent that the carrying value of an indefinite-lived intangible asset exceeds its fair value.

Similar to the assessment of goodwill, events and changes in circumstances could cause management to utilize different assumptions in subsequent evaluations, which could materially impact the results of an impairment assessment.

Management concluded that the carrying value of the Company’s indefinite-lived intangible assets other than goodwill was not impaired at September 30, 2020 or 2019.

Deferred Debt Issuance Costs

Costs directly associated with obtaining debt financing are deferred and amortized over the term of the related debt agreement.

Unamortized amounts related to long-term debt are reflected on the Consolidated Balance Sheets as a direct deduction from the carrying amount of the related long-term debt liability.

Comprehensive Income

Comprehensive income is a measure of net income and all other changes in equity that result from transactions other than transactions with stockholders.

Management has determined that net income is the Company’s only component of comprehensive income.

Accordingly, there is no difference between net income and comprehensive income.

The Company performed a qualitative impairment assessment of its indefinite-lived name license.

The qualitative assessment did not identify indicators of impairment, and it was determined that is more likely than not the indefinite-lived name license fair value was more than its carrying amount.

Accordingly, no further analysis was required or performed.

Deferred Financing Costs

Costs directly associated with obtaining debt financing are capitalized upon the issuance of long-term debt and amortized over the term of the related debt agreement.

Unamortized amounts are presented on the Consolidated Balance Sheets as a direct deduction from the carrying amount of the related long-term debt liability.

Loan issuance costs associated with the Revolving Credit Facility are presented as a component of other assets.

Loan issuance costs incurred in connection with the Revolving Credit Facility are amortized using the straight-line method over the life of the Credit Agreement.

The provision for income taxes includes federal and state income taxes.

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Under this method, deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial statement carrying values and their respective tax bases.

Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the fiscal years in which the temporary differences are

expected to be reversed or settled.

Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the fiscal years in which the temporary differences are expected to be reversed or settled.

The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.

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Diluted net income per common share attributable to common stockholders is the same as basic net income per share attributable to common stockholders, but includes dilutive unvested stock awards using the treasury stock method.

Stripping Costs

Stripping costs are costs incurred for the removal of overburden or waste materials for the purpose of obtaining access to aggregate materials that will be commercially produced.

Stripping costs incurred during the development stage of a mine (pre-production stripping) are capitalized and reported within property, plant and equipment, net in our accompanying Consolidated Balance Sheets.

Capitalized pre-production stripping costs are depleted in accordance with the units-of-production method as aggregates are extracted.

Pre-production stripping costs included in property, plant and equipment were $ 2.7 million and $ 0.0 million , respectively, for the fiscal years ended September 30, 2021 and 2020.

Stripping costs incurred during the production phase of a mine are variable production costs and are included in the costs of the inventory produced during the period that the stripping costs are incurred.

The production phase of a mine is deemed to begin when saleable minerals are extracted, regardless of the level of production.

However, the production phase does not commence with the removal of de minimis saleable mineral material that occurs in conjunction with the removal of overburden or waste material for the purpose of obtaining access to aggregate materials.

Stripping costs considered as production costs and included in the costs of inventory produced for the fiscal years ended September 30, 2021, 2020 and 2019 was $ 1.8 million, $ 1.3 million and $ 1.6 million, respectively.

Asset Retirement Obligations

Asset retirement obligations (AROs) are legal obligations associated with the retirement of tangible long-lived assets resulting from the acquisition, construction, development and/or normal use of the underlying assets.

The ARO is recognized at its estimated fair value in the period in which it is incurred.

These obligations generally include the estimated net future costs of dismantling, restoring and reclaiming operating mines and related mine sites, in accordance with federal, state, local regulatory and land lease agreement requirements.

Upon initial recognition of a liability, the associated asset retirement costs are capitalized as part of the related long-lived asset and depreciated over the estimated useful life of the related asset.

The liability is accreted over time through charges to earnings.

Reclamation costs are periodically adjusted to reflect changes in the estimated present value resulting from the passage of time and revisions to the estimates of either the timing or amount of the reclamation and abandonment costs.

If the ARO is settled for an amount other than the carrying amount of the liability, the Company recognizes a gain or loss on settlement.

The Company reviews, on an annual basis, unless otherwise deemed necessary, the asset retirement obligation at each mine site in accordance with ASC guidance for accounting for reclamation obligations.

To determine the fair value of the AROs, the Company estimates the cost for a third party to perform the legally required reclamation activities including a reasonable profit margin.

This cost is then increased for future estimated inflation based on the estimated years to complete and discounted to fair value using present value techniques with a credit-adjusted, risk-free rate.

See Note 24 - Asset Retirement Obligations.

Right of Use Assets and Lease Liabilities

At the inception of a contractual arrangement, the Company determines whether a contract contains a lease by assessing whether the contract conveys to the Company the right to control the use of an identified asset in exchange for consideration over a period of time.

Leases are recognized in accordance with ASC Topic 842, Leases (“Topic 842”), which we adopted effective October 1, 2019 using a modified retrospective transition approach.

The Company measures and records an operating lease liability equal to the present value of the future lease payments.

Because most of the Company’s leases do not provide an implicit rate, the Company’s incremental borrowing rate is used in determining the present value of lease payments.

The amount of the operating lease right-of-use asset consists of:

(i) the amount of the initial measurement of the operating lease liability;

(ii) any lease payments made at or before the commencement date, minus any lease incentives received;

and (iii) any initial direct costs incurred.

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

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

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

Comprehensive Income

We report comprehensive income in our Consolidated Statements of Comprehensive Income and Consolidated Statements of Stockholders’ Equity.

Comprehensive income comprises two subsets:

net income and other comprehensive income (OCI).

OCI includes adjustments for changes in fair value of an interest rate swap contract derivative.

For additional information about comprehensive income see Note 23 - Other Comprehensive Income.

Segment Reporting and Reporting Units

The Company operates in Alabama, Florida, Georgia, North Carolina and South Carolina through its wholly owned subsidiaries located in four southeastern states.

As of September 30, 2021, the Company operated in Alabama, Florida, Georgia, North Carolina and South Carolina through its wholly owned subsidiaries located in four southeastern states.

Each of the Company’s platform operating companies engages in essentially the same business, which consists primarily of infrastructure and road construction.

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Management further determined that, based on their economic similarities, the Company’s five platform operating companies, representing components, should be aggregated into one reporting unit for purposes of assessing potential impairment of goodwill in accordance with ASC Topic 350, Intangibles — Goodwill and Other .

These legal entities represent material acquisitions that occurred over time in Alabama, Florida, Georgia and North Carolina pursuant to the Company’s strategic growth strategy.

These legal entities represent material acquisitions that occurred over time pursuant to the Company’s strategic growth strategy.

Each platform company is managed by its president, who has primary responsibility for the respective operating company.

Collectively, these presidents are directly accountable to, and maintain regular contact with, the CODM as a team to discuss operating activities, financial results, forecasts, and operating plans for the Company’s single operating segment.

Reclassifications

Certain amounts in prior periods have been reclassified to conform to the current period presentation.

These reclassifications had no effect on previously reported net income.

Business Acquisitions

The Company accounts for business combinations using the acquisition method of accounting in accordance with ASC 805 - Business Combinations, which allocates the fair value of the purchase consideration to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values.

The excess of the purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill.

Determining the fair values of assets acquired and liabilities assumed requires judgment and often involves the use of significant estimates and assumptions.

We engage third-party appraisal firms when appropriate to assist in the fair value determination of assets acquired and liabilities assumed.

Acquisition-related expenses and transaction costs associated with business combinations are expensed as incurred.

The Company may adjust the amounts recognized in an acquisition during a measurement period not to exceed one year from the date of acquisition.

Any such adjustments are the result of subsequently obtaining additional information that existed at the acquisition date regarding the assets acquired or the liabilities assumed.

Measurement period adjustments are generally recorded as increases or decreases to goodwill, if any, recognized in the transaction.

The cumulative impact of measurement period adjustments on depreciation, amortization and other income statement items are recognized in the period the adjustment is determine d.

Note 3 - Accounting Standards

Recently Adopted Accounting Pronouncements

ASC Topic 842

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

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

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

As a result, on the adoption date, the Company recognized (i) a net cumulative decrease to retained earnings of $ 0.2 million, (ii) additional operating lease right-of-use assets of $ 9.1 million, (iii) current operating lease liabilities of $ 2.9 million and (iv) non-current operating lease liabilities of $ 6.4 million.

The Company elected to apply optional practical expedients that

allowed the Company to forego reassessments of (i) the classification of leases existing at the date of adoption, (ii) the initial direct costs of any existing leases and (iii) whether any expired or existing contracts were, or contained, leases.

Accordingly, prior comparable periods were not restated.

In connection with the adoption of Topic 842, the Company implemented several accounting policies relating to the identification and measurement of operating lease right-of-use assets and liabilities.

If so, the Company measures and records an operating lease liability equal to the present value of the future lease payments.

Because most of the Company’s leases do not provide an implicit rate, the Company’s incremental borrowing rate is used in determining the present value of lease payments.

The amount of the operating lease right-of-use asset consists of:

(i) the amount of the initial measurement of the operating lease liability;

(ii) any lease payments made at or before the commencement date, minus any lease incentives received;

and (iii) any initial direct costs incurred.

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

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

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

In June 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-13, “Financial Instruments - Credit Losses (Topic 326),” which introduces an impairment model that is based on expected losses rather than incurred losses.

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

In August 2018, the FASB issued ASU 2018-15, “Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract.” This ASU requires customers in a hosting arrangement that is a service contract to capitalize certain implementation costs as if the arrangement was an internal-use software project.

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.

Recently Issued Accounting Pronouncements Not Yet Adopted

The FASB has issued certain Accounting Standards Updates (“ASUs”) that are applicable to the Company and will be adopted in future periods.

The FASB has issued certain ASUs that are applicable to the Company and will be adopted in future periods.

The consolidated financial statements and related disclosures for the fiscal years ended September 30, 2021 and 2020 do not reflect the requirements of this guidance.

The following is a brief description of recently issued ASUs and management’s current assessment regarding the methods, timing and impact of adoption of such ASUs by the Company in the future.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (“Topic 326”), which introduces an impairment model that is based on expected losses rather than incurred losses.

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 are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years.

The Company expects to adopt this guidance as required and does not expect such adoption to cause a material impact to the Company’s consolidated financial statements.

In August 2018, the FASB issued ASU 2018-15, Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (“ASU 2018-15”).

This ASU requires customers in a hosting arrangement that is a service contract to capitalize certain implementation costs as if the arrangement was an internal-use software project.

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

The Company expects to adopt this guidance as required and does not expect such adoption to cause a material impact to the Company’s consolidated financial statements.

In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848):

Facilitation of Effects of Reference Rate Reform on Financial Reporting,” which provides optional expedients and exceptions for applying GAAP to contract modification and hedging relationships affected by reference rate reform.

The guidance only applies to contracts, hedging relationships, and other transactions that reference the London interbank offered rate (“LIBOR”) or another reference rate expected to be discontinued as a result of reference rate reform.

This optional guidance was effective beginning on March 12, 2020, and the Company may elect to apply the amendments prospectively through December 31, 2022.

The Company does not expect such adoption to cause a material impact to the Company’s consolidated financial statements.

In December 2019, the FASB issued ASU 2019-12, “Simplifying the Accounting for Income Taxes,” which adds new guidance to simplify the accounting for income taxes and changes the accounting for certain income tax transactions.

The new standard is effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years.

The Company expects to adopt

this guidance as required and does not expect such adoption to cause a material impact to the Company’s consolidated financial statements.

Note 4 - Business Acquisitions

Alabama Acquisition - July 2019

On July 12, 2019, a subsidiary of the Company acquired substantially all of the assets of an HMA manufacturing plant and paving company located near Gadsden, Alabama.

The acquired business is expected to benefit from synergies resulting from its proximity to the Company’s preexisting operations in northeast Alabama, including an aggregates quarry.

The acquisition was accounted for as a business combination in accordance with ASC 805.

The purchase price of $ 5.0 million was paid from cash on hand at closing.

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

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

The amount of the purchase price exceeding the net fair value of identifiable assets acquired and liabilities assumed was recorded as goodwill in the amount of approximately $ 2.4 million, which is deductible for income tax purposes.

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

The results of operations since the July 12, 2019 acquisition date attributable to this acquisition are included in the Company’s consolidated financial statements and were not material to the Consolidated Statements of Income for the fiscal year ended September 30, 2019.

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

The Company recorded certain costs to effect the acquisition as they were incurred, which are reflected as general and administrative expenses on the Consolidated Statements of Income in the amount of $ 0.1 million for the fiscal year ended September 30, 2019.

Florida Acquisition - February 2019

On February 28, 2019, a subsidiary of the Company acquired substantially all of the assets of an HMA and ready-mix concrete business located in Okeechobee, Florida.

This transaction enables the Company to serve new markets in south central Florida through an expanded geographic presence in the state.

The acquisition was accounted for as a business combination in accordance with ASC 805.

The purchase price of $ 8.9 million was paid from cash on hand at closing.

North Carolina Acquisitions - Final

During the fiscal year ended September 30, 2021, a subsidiary of the Company purchased five HMA production and paving companies and a grading and sitework company on the following dates and based in the following locations:

(i) on October 8, 2020, in Carthage, North Carolina, (ii) on October 30, 2020, in Ahoskie, North Carolina, (iii) on December 3, 2020, in Raleigh, North Carolina, (iv) on December 18, 2020, in Kitty Hawk, North Carolina, (v) on June 22, 2021, in Wilson, North Carolina and (vi) on September 10, 2021, in Albemarle, North Carolina.

The acquired businesses added fourteen HMA plants primarily in central and eastern North Carolina, providing the Company with access to additional markets and further enhancing the Company’s footprint in the state.

These acquisitions were accounted for as business combinations in accordance with Topic 805.

The Company consulted with independent third parties to assist in the valuation process.

As of September 30, 2021, the Company has finalized its purchase price allocation for these acquisitions.

Total consideration transferred for these six acquisitions was $ 97.9 million as of September 30, 2021.

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

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

The purchase price exceeding the net fair value of identifiable assets acquired and liabilities assumed was recorded as goodwill and other identifiable intangible assets, including customer relationships and customer backlog, in the amount of $ 3.2 million, which is deductible for income tax purposes.

The amount of the purchase price exceeding the net fair value of identifiable assets acquired and liabilities assumed was recorded as goodwill in the aggregate amount of $ 33.3 million for these six acquisitions, which is deductible for income tax purposes.

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

The results of operations since the February 28, 2019 acquisition date attributable to this acquisition are included in the consolidated financial statements since the acquisition date and were not material to the Consolidated Statements of Income for the year fiscal ended September 30, 2019.

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

Florida Acquisition - October 2019

On October 1, 2019, a subsidiary of the Company acquired substantially all of the assets of an HMA manufacturing plant and paving company located in Palm City, Florida.

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

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

The results of operations attributable to these acquisitions are included in the Company’s Consolidated Statements of Comprehensive Income for the fiscal year ended September 30, 2021.

The Company recorded certain costs to effect the acquisition as they were incurred, which are reflected in general and administrative expenses on the Company’s Consolidated Statements of Comprehensive Income in the amount of $ 0.6 million for the fiscal year ended September 30, 2021.

North Carolina Acquisition - Provisional

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

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

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

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

As of September 30, 2021, the purchase price allocation is provisional pending certain information necessary to finalize estimates of fair value of certain assets acquired.

The Company consulted with independent third parties to assist in the valuation process.

The Company expects to finalize these values as soon as practicable and no later than one year from the acquisition date.

Total consideration transferred for this acquisition was $ 31.2 million as of September 30, 2021.

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

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

The amount of the purchase price exceeding the net fair value of identifiable assets acquired and liabilities assumed was recorded as provisional goodwill in the amount of approximately $ 2.6 million, which is deductible for income tax purposes.

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

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

The Company recorded certain costs to effect the acquisition as they were incurred, which are reflected in general and administrative expenses on the Company’s Consolidated Statements of Income in the amount of $ 0.1 million for the fiscal year ended September 30, 2020.

Florida Acquisition - March 2020

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

The results of operations since the August 2, 2021 acquisition date attributable to this acquisition are included in the Company’s Consolidated Statements of Comprehensive Income for the fiscal year ended September 30, 2021.

The Company recorded certain costs to effect the acquisition as they were incurred, which are reflected in general and administrative expenses on the Company’s Consolidated Statements of Comprehensive Income in the amount of $ 0.3 million for the fiscal year ended September 30, 2021.

Alabama Acquisition - Provisional

On July 30, 2021, a subsidiary of the Company acquired an HMA contracting company and related entities, all headquartered in Cullman, Alabama.

The acquisition added four hot-mix asphalt plants, four aggregates facilities, and a diverse fleet of trucks and construction equipment to support the Company’s operations in central and northern Alabama.

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

The $ 9.8 million purchase price was paid in cash at closing, with an additional $ 2.7 million of cash paid for plant inventory.

As of September 30, 2021, the purchase price allocation is provisional pending certain information necessary to finalize estimates of fair value of certain assets acquired and liabilities assumed.

The Company consulted with independent third-parties to assist in the valuation process.

The Company expects to finalize these values as soon as practicable and no later than one year from the acquisition date.

Total consideration transferred for this acquisition was $ 81.7 million as of September 30, 2021.

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

The amount of the purchase price exceeding the net fair value of identifiable assets acquired and liabilities assumed was recorded as goodwill in the amount of approximately $ 0.1 million, which is deductible for income tax purposes.

The amount of the purchase price exceeding the net fair value of identifiable assets acquired and liabilities assumed was recorded as provisional goodwill in the amount of approximately $ 3.2 million, which is deductible for income tax purposes.

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

The results of operations since the March 23, 2020 acquisition date attributable to this acquisition are included in the Company's consolidated financial statements and were not material to the Consolidated Statements of Income for the fiscal year ended September, 30, 2020.

Pro forma results of operations as if the acquisition had been consummated October 1, 2019 would not be material to the Consolidated Statements of Income.

The Company recorded certain costs to effect the acquisition as they were incurred, which are reflected in general and administrative expenses on the Company’s Consolidated Statements of Income in the amount of $ 0.1 million for the fiscal year ended September 30, 2020.

Combined Acquisitions Completed During the Fiscal Year Ended September 30, 2020

For acquisitions completed during the fiscal year ended September 30, 2020, we paid combined consideration of $ 30.2 million, allocated as follows:

$ 3.1 million of inventory, $ 19.3 million of property, plant and equipment and goodwill of $ 7.8 million.

The Consolidated Statement of Income for the fiscal year ended September 30, 2020 includes $ 42.9 million of revenue attributable to the operations of fiscal year 2020 acquisitions from their respective acquisition dates through September 30, 2020.

Unaudited pro forma revenues, as if the fiscal year 2020 acquisitions had been completed as of October 1, 2018, are $ 793.7 million and $ 831.8 million for the fiscal years ended September 30, 2020 and 2019, respectively.

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 occurred on October 1, 2018.

The results of operations since the July 30, 2021 acquisition date attributable to this acquisition are included in the Company’s Consolidated Statements of Comprehensive Income for the fiscal year ended September 30, 2021.

The Company recorded certain costs to effect the acquisition as they were incurred, which are reflected in general and administrative expenses on the Company’s Consolidated Statements of Comprehensive Income in the amount of $ 0.4 million for the fiscal year ended September 30, 2021.

Combined Acquisitions During the Fiscal Year Ended September 30, 2021

The following table summarizes the consideration for the aforementioned acquisitions and the amounts of identified assets acquired and liabilities assumed as of September 30, 2021 (in thousands):

North Carolina Acquisitions - Final North Carolina Acquisition - Provisional Alabama Acquisition - Provisional Total

Accounts receivable $ 110 $ — $ — $ 110

Inventories 4,409 410 6,480 11,299

Property, plant and equipment 60,819 9,794 35,020 105,633

Mineral reserves (included in property, plant and equipment) — 18,600 38,118 56,718

Intangible assets — — 75 75

Total assets 65,338 28,804 79,693 173,835

Total liabilities — — ( 718 ) ( 718 )

Goodwill 33,320 2,597 3,157 39,074

Total consideration transferred 97,885 31,167 81,682 210,734

Total consideration payable 773 234 450 1,457

Total purchase price $ 98,658 $ 31,401 $ 82,132 $ 212,191

The Consolidated Statements of Comprehensive Income for the fiscal year ended September 30, 2021 includes $ 79.3 million of revenue and $ 4.9 million of net loss attributable to the operations of the businesses acquired during the 2021 fiscal year from their respective acquisition dates through September 30, 2021.

The following presents pro forma revenues and net income as though the acquisitions had occurred on October 1, 2018 (unaudited, in thousands):

For the Fiscal Year Ended September 30,

2021 2020 2019

Pro forma revenues $ 984,222 $ 981,079 $ 996,873

Pro forma net income $ 21,847 $ 46,701 $ 51,544

Pro forma financial information is presented as if the operations of the acquisitions had been included in the consolidated results of the Company since October 1, 2018, and gives effect to transactions that are directly attributable to the acquisitions, including adjustments to:

(a) Include the pro forma results of operations of the acquisitions for the fiscal years ended September 30, 2021, 2020 and 2019.

(b) Include additional depreciation and depletion expense related to the fair value of acquired property, plant and equipment and reserves at aggregates facilities, as applicable, as if such assets were acquired on October 1, 2018 and consistently applied to the Company’s depreciation and depletion methodologies.

(c) Include interest expense under the Term Loan as if the funds borrowed to finance the purchase price were borrowed on October 1, 2018.

Interest expense calculations further assume that no principal payments were made during the period from October 1, 2018 through September 30, 2021, and that the interest rate in effect on the date the Company made the acquisitions was in effect for the period from October 1, 2018 through September 30, 2021.

(d) Exclude $ 1.3 million of acquisition-related expenses from the fiscal year ended September 30, 2021, as though such expenses were incurred prior to the pro forma acquisition date of October 1, 2018.

Pro forma information is presented for informational purposes and may not be indicative of revenue or net income that would have been achieved if these acquisitions had occurred on October 1, 2018.

Combined Acquisitions During the Fiscal Year Ended September 30, 2020

During the fiscal year ended September 30, 2020, a subsidiary of the Company purchased a HMA production and paving company and two HMA manufacturing plants and certain related assets on the following dates and based in the following locations:

(i) on October 1, 2019, in Palm City, Florida, (ii) on March 23, 2020, in Pensacola and DeFuniak Springs, Florida.

These acquisitions were accounted for as business combinations in accordance with Topic 805.

Total consideration transferred for these two acquisitions was $ 27.5 million.

The amount of the purchase price exceeding the net fair value of identifiable assets acquired and liabilities assumed was recorded as goodwill in the aggregate amount of $ 7.8 million for these acquisitions.

Combined Acquisitions During the Fiscal Year Ended September 30, 2019

During the fiscal year ended September 30, 2019, subsidiaries of the Company purchased a HMA production and paving company and a ready-mix concrete company on the following dates and based in the following locations:

(i) on February 28, 2019, in Okeechobee, Florida, (ii) on July 12, 2019, in Gadsden, Alabama.

These acquisitions were accounted for as business combinations in accordance with Topic 805.

Total consideration transferred for these two acquisitions was $ 13.9 million.

The amount of the purchase price exceeding the net fair value of identifiable assets acquired and liabilities assumed was recorded as goodwill in the aggregate amount of $ 5.6 million for these acquisitions.

Note 5 - Contracts Receivable Including Retainage, net

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At September 30, 2021, the Company had unsatisfied or partially unsatisfied performance obligations under construction project contracts representing approximately $ 725.5 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 $ 421.0 million during the fiscal year ending September 30, 2021 and approximately $ 48.7 million thereafter.

The Company expects to earn revenue as it satisfies its performance obligations under those contracts in the amount of approximately $ 599.6 million during the fiscal year ending September 30, 2022 and approximately $ 125.9 million thereafter.

Note 7 - Other Assets

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September 30,

Settlement receivable $ — $ 7,706

Prepaid expenses $ 5,438 $ 3,612

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Total prepaid expenses and other current assets $ 7,790 $ 5,041

The settlement receivable was received in full during the fiscal year ended September 30, 2020 (See Note 20 - Settlement Agreement).

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

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Land and improvements 53,415 38,647

Quarry reserves 20,238 20,678

Mineral reserves 86,556 22,205

Buildings 27,163 18,307

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Total property, plant and equipment, net $ 404,832 $ 237,230

Depreciation, depletion and amortization expense related to property, plant and equipment for the fiscal years ended September 30, 2020 and 2019 was $ 39.1 million and $ 30.1 million, respectively.

Depreciation, depletion and amortization expense related to property, plant and equipment for the fiscal years ended September 30, 2021, 2020 and 2019 was $ 49.5 million, $ 39.1 million and $ 30.1 million, respectively.

Mineral reserves, net of accumulated depletion, for the years ended September 30, 2021 and 2020 were $ 84.1 million and $ 20.3 million, respectively.

These amounts include $ 2.1 million and $ 0.0 million of asset retirement obligation assets, net of accumulated depletion associated with active mining operations for the years ended September 30, 2021 and 2020, respectively and $ 2.7 million and $ 0.0 million of capitalized stripping costs, net of accumulated depletion associated with development stage mining operations for the fiscal years ended September 30, 2021 and 2020, respectively.

Note 9 - Goodwill and Other Intangible Assets

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License Indefinite $ 2,000 N/A $ 2,000 $ 2,000 N/A $ 2,000

Definite-lived:

Finite-lived:

Customer relationship 8 years

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Total intangible assets $ 4,940 $ ( 777 ) $ 4,163 $ 3,665 $ ( 441 ) $ 3,224

Total amortization expense related to definite-lived intangible assets was $ 0.2 million and $ 1.1 million for the fiscal years ended September 30, 2020 and 2019, respectively.

Estimated future total amortization expense related to definite-lived intangible assets is as follows (in thousands):

Total amortization expense related to finite-lived intangible assets was $ 0.3 million, $ 0.2 million and $ 1.1 million for the fiscal years ended September 30, 2021, 2020 and 2019, respectively.

Estimated future total amortization expense related to finite-lived intangible assets is as follows (in thousands):

Fiscal Year Estimated Amortization Expense

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Long-term debt:

BBVA Term Loan $ 92,850 $ 44,700

BBVA Revolving Credit Facility — 5,000

Other long-term debt — 563

Term Loan $ 197,500 $ 92,850

Revolving Credit Facility 20,000 —

Total long-term debt 217,500 92,850

Deferred debt issuance costs ( 1,325 ) ( 797 )

Debt discount — ( 4 )

Current maturities of long-term debt ( 10,000 ) ( 13,000 )

Long-term debt, net of current maturities $ 206,175 $ 79,053

The Company and each of its subsidiaries are parties to a credit agreement with BBVA USA (formerly known as Compass Bank), 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 revolving credit facility (the “Revolving Credit Facility”).

Since 2017, the Company and each of its subsidiaries have been parties to a credit agreement with PNC Bank, National Association (successor in interest to BBVA USA) and certain other lenders party from time to time thereto (as amended and restated, the “Credit Agreement”).

The Credit Agreement has been amended and restated on multiple occasions since its inception in order to provide for changes in the economic terms of the credit facility and developments at the Company.

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

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.

At September 30, 2020 and 2019, there was $ 92.9 million and $ 44.7 million, respectively, of principal outstanding under the Term Loan, $ 0.0 million and $ 5.0 million, respectively, of principal outstanding under the Revolving Credit Facility, and availability of $ 39.3 million and $ 14.4 million, respectively, under the Revolving Credit Facility, including reduction for outstanding letters of credit.

In June 2021, the Credit Agreement was amended and restated to provide for a Term Loan in an initial aggregate principal amount of $ 200 million and a Revolving Credit Facility in an initial aggregate principal amount of $ 225 million.

Among other things, the proceeds of the Term Loan were used to refinance indebtedness of the Company that was outstanding immediately prior to the restatement.

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.

At September 30, 2021 and 2020, there was $ 197.5 million and $ 92.9 million, respectively, of principal outstanding under the Term Loan, $ 20.0 million and $ 0.0 million , respectively, of principal outstanding under the Revolving Credit Facility, and availability of $ 193.7 million and $ 39.3 million, respectively, under the Revolving Credit Facility, including a reduction for outstanding letters of credit.

The Credit Agreement contains customary negative covenants for agreements of this type, including, but not limited to, restrictions on the Company’s ability to make acquisitions, make loans or advances, make capital expenditures and investments, pay dividends, create or incur indebtedness, create liens, wind up or dissolve, consolidate, merge or liquidate, or sell, transfer or dispose of assets.

The Credit Agreement also requires the Company to satisfy certain financial covenants, including a minimum fixed charge coverage ratio of 1.20 -to-1.00 and a maximum consolidated leverage ratio of 2.75 -to-1.00, subject to certain adjustments.

At September 30, 2020 and 2019,

the Company’s fixed charge coverage ratio was 2.85 -to-1.00 and 4.04 -to-1.00, respectively, and the Company’s consolidated leverage ratio was 1.08 -to-1.00 and 0.66 -to-1.00, respectively.

Agreement also requires the Company to satisfy certain financial covenants, including a minimum fixed charge coverage ratio of 1.20 -to-1.00 and a maximum consolidated leverage ratio of 3.00 -to-1.00, subject to certain adjustments.

At September 30, 2021 and 2020, the Company’s fixed charge coverage ratio was 3.29 -to-1.00 and 2.85 -to-1.00, respectively, and the Company’s consolidated leverage ratio was 1.99 -to-1.00 and 1.08 -to-1.00, respectively.

At both September 30, 2021 and 2020, the Company was in compliance with all covenants under the Credit Agreement.

From time to time, the Company has entered into interest rate swap agreements to hedge against the risk of changes in interest rates.

These interest rate swap agreements do not meet the criteria for hedge accounting treatment under GAAP.

At September 30, 2020 and 2019, the aggregate notional value of these interest rate swap agreements was $ 46.5 million and $ 21.5 million, respectively, and the fair value was $( 1.7 ) million and $( 0.3 ) million, respectively, which is included within other liabilities on the Company’s Consolidated Balance Sheets.

The scheduled contractual repayment terms of long-term debt at September 30, 2020 were as follows:

At September 30, 2021 and 2020, the aggregate notional value of these interest rate swap agreements was $ 198.3 million and $ 46.5 million, respectively, and the fair value was $( 0.8 ) million and $( 1.7 ) million, respectively, which is included within other current liabilities or other long-term liabilities on the Company’s Consolidated Balance Sheets.

The scheduled contractual repayment terms of long-term debt at September 30, 2021 are as follows:

Fiscal Year Amount

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Total $ 217,500

Interest expense was $ 3.6 million and $ 3.3 million for the fiscal years ended September 30, 2020 and 2019, respectively.

Amortization of deferred debt issuance costs and debt discounts included in interest expense was $ 0.2 million and $ 0.1 million for the fiscal years ended September 30, 2020 and 2019, respectively.

Interest expense was $ 2.5 million, $ 3.6 million and $ 3.3 million for the fiscal years ended September 30, 2021, 2020 and 2019, respectively.

Amortization of deferred debt issuance costs and debt discounts included in interest expense was $ 0.3 million, $ 0.2 million and $ 0.1 million for the fiscal years ended September 30, 2021, 2020 and 2019, respectively.

Note 12 - Equity

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

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

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

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As of September 30, 2021, there were 36,600,639 shares of Class A common stock and 15,691,839 shares of Class B common stock outstanding.

Restricted Stock Awards and Options

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.

Restricted Stock Awards

During the fiscal year ended September 30, 2021, the Company awarded a total of 510,733 restricted shares of Class A common stock to certain members of Company management under the Construction Partners, Inc.

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

In addition, an employee of the Company exercised an option to purchase 74,592 shares of Class B common stock at an exercise price of $ 0.0357 per share.

No restricted shares of Class A common stock were issued, and no options to purchase shares of Class A or Class B common stock were exercised, during the fiscal year ended September 30, 2020.

Additional information about these transactions is set forth in Note 14 - Equity-Based Compensation.

Amendment to the Equity Incentive Plan

On May 24, 2019, the Company adopted an amendment to the Equity Incentive Plan relating to exceptions from the $ 750,000 limit on the aggregate dollar value of equity-based awards granted during any calendar year to a non-employee director.

Prior to the adoption of the amendment, the limit could be multiplied by two with respect to awards granted in the calendar year in which a non-employee director first joined the Company’s board of directors.

The amendment changed the period within which the aggregate value of equity-based awards may be multiplied by two to be the calendar year in which a non-employee director is first granted equity-based awards under the Equity Incentive Plan.

Registration Rights Agreement

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Under the Registration Rights Agreement, the RRA Holders have “demand” registration rights, meaning that the Company must register under the Securities Act shares of the Company’s common stock owned by such RRA Holders upon their demand under certain circumstances, and “piggyback” registration rights, meaning that, if the Company proposes to register an offering of securities, it generally must give written notice to the RRA Holders to allow each to include its shares in the registration.

In general, the Company must pay all out-of-pocket expenses in connection with a registration under the Registration Rights Agreement, including filing and registration fees, printing costs, fees and expenses of the Company’s legal counsel and independent registered public accountants and fees and expenses for one legal counsel for the applicable RRA Holders.

In general, the Company must pay all out-of-pocket expenses in connection with a

registration under the Registration Rights Agreement, including filing and registration fees, printing costs, fees and expenses of the Company’s legal counsel and independent registered public accountants and fees and expenses for one legal counsel for the applicable RRA Holders.

The RRA Holders whose shares are registered must pay all incremental selling expenses relating to any offering, such as underwriters’ commissions and discounts, brokerage fees, underwriter marketing costs and any additional legal counsel that they may engage.

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The Registration Rights Agreement expires on May 4, 2023.

Secondary Offerings of Class A Common Stock

In September 2019, certain stockholders of the Company (the “Selling Stockholders”) completed an underwritten secondary offering (the “2019 Secondary Offering”) of 5,000,000 shares of Class A common stock at a public offering price of $ 14.25 per share.

In addition, the underwriters of the 2019 Secondary Offering exercised in full their option to purchase an additional 750,000 shares of Class A common stock from the Selling Stockholders.

The Company did not receive any proceeds from the sale of shares by the Selling Stockholders and, pursuant to the Registration Rights Agreement, incurred approximately $ 0.7 million in expenses in connection with the 2019 Secondary Offering.

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

In addition, the underwriters of the 2020 Secondary Offering exercised in full their option to purchase an additional 862,500 shares of Class A common stock from the Selling Stockholders.

The Company did not receive any proceeds from the sale of shares by the Selling Stockholders and, pursuant to the Registration Rights Agreement, incurred approximately $ 0.2 million in expenses in connection with the 2020 Secondary Offering.

Note 13 - Earnings Per Share

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For the Fiscal Year Ended September 30,

2021 2020 2019

Net income attributable to common stockholders $ 20,177 $ 40,297 $ 43,121

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For the Fiscal Year Ended September 30,

2021 2020 2019

Net income attributable to common stockholders $ 20,177 $ 40,297 $ 43,121

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Note 14 - Equity-Based Compensation

Restricted Stock Awards and Options

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 cash compensation.

Restricted Stock Awards

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.

The grants are classified as equity awards.

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

The grants will vest as to two-thirds of the underlying shares on January 1, 2021 and as to the remaining one-third of the underlying shares on January 1, 2022.

During the fiscal years ended September 30, 2020 and 2019, the Company recorded $ 1.6 million and $ 0.5 million, respectively, of compensation expense in connection with these grants, which is reflected as general and administrative expenses in the Company’s Consolidated Statements of Income.

During the fiscal years ended September 30, 2021, 2020 and 2019, the Company recorded $ 1.3 million, $ 1.6 million and $ 0.5 million, respectively, of compensation expense in connection with these grants, which is reflected as general and administrative expenses in the Company’s Consolidated Statements of Comprehensive Income.

At September 30, 2021, there was approximately $ 0.4 million of unrecognized compensation expense related to these awards.

Option Exercises

In August 2019, an employee of the Company exercised an option to purchase 74,592 shares of Class B common stock at a price of $ 0.0357 per share.

The option was granted in March 2017 pursuant to a non-plan option agreement.

The option was fully vested upon the date of grant, but, until the option agreement was subsequently amended, the option was exercisable only during the ten-day period immediately preceding a change in control of the Company.

In August 2019, the Company and the employee amended the option agreement to (i) adjust the number of underlying shares and exercise price of the option to account for the 25.2-to-1 stock split and share reclassification that occurred in April 2018;

(ii) reduce the exercise price (as adjusted) for the shares underlying the option;

(iii) make the option immediately exercisable;

and (iv) provide that the option would expire on the earlier of December 31, 2019 or the occurrence of one of the other expiration events set forth in the option agreement.

During the fiscal year ended September 30, 2019, the Company recorded approximately $ 0.4 million of compensation expense in connection with the option amendment, which is reflected in general administrative expenses on the Company’s Consolidated Statements of Income.

At September 30, 2020, there was no unrecognized compensation expense related to the option.

The grants are classified as equity awards.

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

During the fiscal year ended September 30, 2021, the Company recorded compensation expense in connection with these grants in the amount of $ 2.2 million, which is reflected as general and administrative expenses in the Company’s Consolidated Statements of Comprehensive Income.

At September 30, 2021, there was approximately $ 11.4 million of unrecognized compensation expense related to these awards.

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

Fiscal Year Number of Shares

Total 595,561

Note 15 - Provision for Income Taxes

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September 30,

2021 2020 2019

Federal $ 3,609 $ 8,960 $ 9,780

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State net operating loss 488 664

Employee benefits 736 37

Accrued insurance claims 1,610 1,583

Total deferred tax assets, net 3,772 3,574

Other 335 556

Total deferred tax assets 4,168 3,772

Deferred tax liabilities

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Other ( 459 ) —

Total deferred tax liabilities, net ( 17,389 ) ( 13,881 )

Net deferred tax assets (liabilities) $ ( 13,617 ) $ ( 10,307 )

Total deferred tax liabilities, ( 21,530 ) ( 17,389 )

Net deferred tax liabilities $ ( 17,362 ) $ ( 13,617 )

The Consolidated Balance Sheets at September 30, 2021 and 2020 include gross deferred tax assets of $ 4.2 million and $ 3.8 million, respectively.

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The ultimate realization of deferred tax assets depends on the generation of future taxable income during the periods in which those temporary differences are deductible.

Management considers the scheduled reversal of deferred tax liabilities (including the impact of available carryback and carryforward periods), projected taxable income, and tax-planning strategies in making this assessment.

Management considers the scheduled reversal of deferred tax liabilities (including the impact of available carryforward periods), projected taxable income, and tax-planning strategies in making this assessment.

Based on the weight of all evidence known and available as of the balance sheet date, management believes that these tax benefits are more likely than not to be realized in the future.

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Net deferred tax assets (liabilities) $ ( 17,362 ) $ ( 13,617 )

At September 30, 2020 and 2019, the Company had a state net operating loss carryforward of $ 15.3 million and $ 31.6 million, respectively.

At September 30, 2021 and 2020, the Company had state net operating loss carryforwards of $ 15.2 million and $ 15.3 million, respectively.

The state net operating loss credit carryforwards expire in varying amounts between the fiscal years ended September 30, 2032 and 2036.

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September 30,

2021 2020 2019

Provision for income tax at federal statutory rate $ 5,990 $ 11,142 $ 11,976

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Permanent differences 961 330 319

Other 47 16 93

Provision for income taxes $ 8,349 $ 12,760 $ 13,909

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The Company makes discretionary employer contributions, subject to IRS safe harbor rules.

Employer contributions charged to earnings during the fiscal years ended September 30, 2020 and 2019 were $ 3.4 million and $ 2.9 million, respectively.

Employer contributions charged to earnings during the fiscal years ended September 30, 2021, 2020 and 2019 were $ 3.9 million, $ 3.4 million, and $ 2.9 million, respectively.

Note 17 - Related Parties

On December 31, 2017, the Company sold an indirect wholly owned subsidiary to an immediate family member of a Senior Vice President 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 September 30, 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.

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 September 30, 2021, $ 0.1 million and $ 0.4 million was reflected on the Company’s Consolidated Balance Sheets within other current assets and other assets, respectively, representing the remaining balances on 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 September 30, 2021, $ 0.1 million and $ 0.2 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 2022 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

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 a Senior Vice President 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 a Senior Vice President 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 of a Senior Vice President of the Company (“Construction Services”).

• 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 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”).

• The Company purchases vehicles from an entity owned by a family member of a Senior Vice President of the Company (“Vehicles - Purchases”).

• The Company rents vehicles from an entity owned by a family member of a Senior Vice President of the Company (“Vehicles - Rent Expense”).

• Family members of a Senior Vice President of the Company provide consulting services to a subsidiary of the Company (“Consulting Services”).

• The Company purchases vehicles from an entity owned by a family member of an executive officer of the Company (“Vehicles - Purchases”).

• The Company rents vehicles from an entity owned by a family member of an executive officer of the Company (“Vehicles - Rent Expense”).

• A family member of an executive officer of the Company provides consulting services to a subsidiary of the Company (“Consulting Services”).

• 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.

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SunTx ( 1,935 ) (2) ( 1,403 ) (2) ( 1,252 ) (2) — —

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

(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.

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

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

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

Note 18 - Commitments and Contingencies

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Under the Revolving Credit Facility, the Company has a total capacity of $ 225.0 million that may be used for a combination of cash borrowings and letter of credit issuances.

At each of September 30, 2020 and 2019, the Company had aggregate letters of credit outstanding in the amount of $ 10.9 million, primarily related to certain insurance policies as described in Note 2 - Significant Accounting Policies.

At each of September 30, 2021 and 2020, the Company had aggregate letters of credit outstanding in the amount of $ 11.3 million and $ 10.9 million, respectively, primarily related to certain insurance policies as described in Note 2 - Significant Accounting Policies.

Purchase Commitments

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Fiscal Year Amount

Minimum Royalties

The Company has lease agreements associated with aggregates facilities under which the Company makes royalty payments.

These agreements are outside the scope of Topic 842.

The payments are generally based on tons sold in a particular period;

however, certain agreements have minimum annual payments.

The Company has commitments in the form of minimum royalties as of September 30, 2021 in the amount of $ 2.4 million, due as follows (in thousands):

Fiscal Year Amount

Thereafter 1,460

Total $ 2,395

Royalty expense recorded in cost of revenue during the fiscal years ended September 30, 2021, 2020 and 2019 was $ 1.2 million, $ 1.3 million and $ 1.7 million, respectively.

Note 19 - Joint Venture

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At September 30, 2021 and 2020, the Company’s investment in the JV was $ 0.1 million and $ 0.2 million, respectively, which is reflected as “Investment in joint venture” on the Company’s Consolidated Balance Sheets.

During the fiscal years ended September 30, 2020 and 2019, the Company recognized $ 0.6 million and $ 1.3 million, respectively, of pre-tax income, representing its 50 % interest in the earnings of the JV, which is reflected as “Earnings from investment in joint venture” on the Company’s Consolidated Statements of Income.

The income tax impact attributable to the Company’s investment in the JV is included within the provision for income taxes in the Company’s Consolidated Statements of Income.

Note 20 - Settlement Agreement

On April 19, 2018, certain of the Company’s subsidiaries entered into settlement agreements with a third party arising from an interruption event not directly related to the Company’s business that the Company does not expect to reoccur (the “Settlement”).

The Settlement provided for the Company’s subsidiaries to receive aggregate net payments of approximately $ 15.7 million in four equal installments between January 2019 and July 2020, in exchange for releasing and waiving all current and future claims against the third party.

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

As of September 30, 2020, all amounts due pursuant to the Settlement have been received in full.

During the fiscal years ended September 30, 2021, 2020 and 2019, the Company recognized $ 0.0 million , $ 0.6 million and $ 1.3 million, respectively, of pre-tax income, representing its 50 % interest in the earnings of the JV, which is reflected as “Earnings from investment in joint venture” on the Company’s Consolidated Statements of Comprehensive Income.

The income tax impact attributable to the Company’s investment in the JV is included within the provision for income taxes in the Company’s Consolidated Statements of Comprehensive Income.

Note 20 - Leases

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As of September 30, 2021, the Company did not have any lease contracts that had not yet commenced but had created significant rights and obligations.

In October 2019, the Company used cash in the amount of $ 11.5 million to buy out certain operating lease obligations.

The components of lease expense were as follows (in thousands):

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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 September 30, 2020, the weighted-average remaining term of the Company’s leases was 8.8 years, and the weighted-average discount rate was 4.00 %.

As of September 30, 2021, the weighted-average remaining term of the Company’s operating leases was 9.1 years, and the weighted-average discount rate was 3.76 %.

As of September 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.

5 unchanged sentences

Total $ 6,697

The Company has lease agreements associated with quarry facilities under which the Company makes royalty payments.

The payments are generally based on tons sold in a particular period;

however, certain agreements have minimum annual payments.

Royalty expense recorded in cost of revenue during the fiscal years ended September 30, 2020 and 2019 was $ 1.3 million and $ 1.7 million, respectively.

Note 21 - Fair Value Measurements

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Level 2 Level 2

Commodity swaps $ 503 $ —

Interest rate swaps 1,708 311

Derivative liabilities included in Level 2 include commodity and interest rate swap contracts.

The fair values of our Level 2 derivative liabilities are estimated using an analysis of the expected cash flow of the contract in combination with marketable observable inputs, including forward and spot prices for commodity swaps and interest rate curves for interest rate swaps.

Commodity swap contracts $ 1,812 $ —

Commodity swap contracts $ — $ 503

Interest rate swap contracts 845 1,708

The fair value of interest rate swap contracts is based on a model-driven valuation using the observable components (e.g., interest rates), which are observable at commonly quoted intervals for the full term of the contracts.

The fair value of our commodity swap contracts is based on an analysis of the expected cash flow of the contract in combination with observable forward price inputs obtained from a third-party pricing source.

The calculations are adjusted for credit risk.

Therefore, our derivative assets and liabilities are classified within Level 2 of the fair value hierarchy.

Derivative assets are included within “Prepaid expenses and other current assets” and “Other assets” on the Company’s Consolidated Balance Sheets.

Derivative liabilities are included within “Accrued expense and other current liabilities” and “Other long-term liabilities” on the Company’s Consolidated Balance Sheets.

Note 22 - Investment in Derivative Instruments

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

Interest rate swap contracts

The Company uses derivative instruments as part of our overall strategy to manage our exposure to market risks associated with fluctuations in interest rates.

We regularly monitor the financial stability and credit standing of the counterparties to our derivative instruments.

We do not enter into derivative financial instruments for speculative purposes.

The Company records all derivatives at fair value.

On the date the derivative contract is entered into, the Company may designate the derivative as one of the following:

(i) a hedge of a forecasted transaction or the variability of cash flows to be paid (“cash flow hedge”) or (ii) a hedge of the fair value of a recognized asset or liability (“fair value hedge”).

Changes in the fair value of a derivative that is qualified and designated as a cash flow hedge or net investment hedge are recorded in other comprehensive income (loss) in the Company’s Consolidated Statements of Comprehensive Income until they are reclassified into earnings in the same period or periods during which the hedged transaction affects earnings.

Changes in the fair value of a derivative that is qualified and designated as a fair value hedge, along with the gain or loss on the hedged asset or liability that is attributable to the hedged risk, are recorded in current period earnings.

If the Company does not specifically designate a derivative as one of the above, changes in the fair value of the undesignated derivative instrument are reported in current period earnings.

Cash flows from designated derivative financial instruments are classified within the same category as the item being hedged in the Consolidated Statements of Cash Flows, while cash flows from undesignated derivative financial instruments are included as an investing activity.

If the Company determines that it qualifies for and will designate a derivative as a hedging instrument, the Company formally documents all relationships between hedging activities, including the risk management objective and strategy for undertaking various hedge transactions.

This process includes matching all derivatives that are designated as cash flow hedges to specific forecasted transactions and linking all derivatives designated as fair value hedges to specific assets and liabilities in the Consolidated Balance Sheets.

The Company performs an initial prospective assessment of hedge effectiveness on a quantitative basis between the inception date and the earlier of the first quarterly hedge effectiveness date or the issuance of the financial statements that include the hedged transaction.

On a quarterly basis, the Company assesses the effectiveness of our designated hedges in offsetting the variability in the cash flows or fair values of the hedged assets or obligations using the Hypothetical Derivative Method.

The Company would discontinue hedge

accounting prospectively when the derivative is no longer highly effective as a hedge, the underlying hedged transaction is no longer probable or the hedging instrument expires, is sold, terminated or exercised.

Commodity swap contracts

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

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

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

The objective of entering into interest rate swaps is to eliminate the variability of cash

flows associated with movements in interest rates over the life of the loans.

The Company does not enter into derivative financial instruments for speculative purposes.

Changes in fair value of commodity swaps are recognized in earnings.

The following table represents the approximate amount of realized and unrealized gains (losses) and changes in fair value recognized in earnings on commodity derivative contracts for the fiscal years ended September 30, 2021, 2020 and 2019 and the fair value of these derivatives as of September 30, 2021 and 2020 (in thousands):

For the Fiscal Year Ended September 30,

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)

2021 2020 2019

Change in 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) Realized Gain (Loss) Unrealized Gain (Loss) Total Gain (Loss)

Cost of revenues $ 830 $ 2,315 $ 3,145 $ ( 432 ) $ ( 503 ) $ ( 935 ) $ — $ — $ —

3 unchanged sentences

Balance Sheet Classification 2021 2020

Prepaid expenses and other current assets - commodity swaps $ 990 $ —

Other assets - commodity swaps 822 —

Accrued expense and other current liabilities - commodity swaps — ( 183 )

Accrued expense and other current liabilities - interest rate swaps ( 97 ) —

Other long-term liabilities - commodity swaps — ( 320 )

Other long-term liabilities - interest rate swaps (1)

( 748 ) ( 1,708 )

Net unrealized (loss) position $ 967 $ ( 2,211 )

(1) Includes designated cash flow hedge of $( 31 ) as of September 30, 2021.

Note 23 - Other Comprehensive Income

Comprehensive income comprises two subsets:

net income and other comprehensive income (OCI).

The components of other comprehensive income are presented in the accompanying Consolidated Statements of Comprehensive Income and Consolidated Statements of Stockholders’ Equity, net of applicable taxes.

The Company’s interest rate swap contract hedge included in other comprehensive income was entered into on August 13, 2021 with an original notional value of $ 160.0 million.

The maturity date of this swap is June 24, 2026.

Amounts in accumulated other comprehensive income (AOCI), net of tax, at September 30, are as follows (in thousands):

AOCI 2021 2020 2019

Interest rate swap contract ( 23 ) — —

Total $ ( 23 ) $ — $ —

Changes in AOCI, net of tax, are as follows (in thousands):

AOCI Interest Rate Hedge

Balance at September 30, 2018 $ —

Net OCI changes —

Balance at September 30, 2019 —

Net OCI changes —

Balance at September 30, 2020 —

Net OCI changes ( 23 )

Balance at September 30, 2021 $ ( 23 )

Amounts reclassified from AOCI to earnings, are as follows (in thousands):

2021 2020 2019

Interest expense $ 224 $ — $ —

Benefit from income taxes ( 56 ) — —

Total reclassifications from AOCI to earnings $ 168 $ — $ —

Note 24 - Asset Retirement Obligations

As discussed in Note 2, the Company has asset retirement obligations (“AROs”), which are liabilities associated with our legally required obligations to reclaim owned and leased aggregates facilities.

At September 30, 2021 and 2020, the Company’s AROs were $ 2.8 million and $ 0.0 million , respectively, which are reflected as “Other long-term liabilities” on the Company’s Consolidated Balance Sheets.

Accretion and depreciation expense related to AROs for the fiscal years ended September 30, 2021, 2020 and 2019 was $ 0.0 million , $ 0.0 million and $ 0.0 million , respectively.

The following is a reconciliation of these asset retirement obligations (in thousands):

For the Fiscal Year Ended September 30,

Asset Retirement Obligations

Balance at beginning of year $ — $ —

Liabilities incurred 2,070 —

Liabilities settled — —

Liabilities assumed (1)

Accretion expense — —

Balance at end of year $ 2,788 $ —

(1) See Note 4 - Business Acquisitions

Note 25 - COVID-19 Pandemic

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

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

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 fiscal year ended September 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.

As the Company continues to monitor the impacts of the pandemic on its financial position, operating results, and cash flows, it will consider and evaluate the need for any additional workforce actions in future periods.

The Company is monitoring the executive order requiring vaccinations for certain employees of federal contractors and the emergency temporary standard issued by OSHA mandating vaccination or testing and masking requirements for companies with more than 100 employees.

Note 26 - Legal Settlement

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 September 30, 2021, all amounts due pursuant to the settlement agreement had been paid in full.

A portion of the aforementioned settlement and associated legal expenses were determined to be non-deductible expenses, which resulted in an unfavorable permanent tax difference for the fiscal year ended September 30, 2021.

Note 27 - Condensed Financial Statements of Parent Company

32 unchanged sentences

( 15,603 ) ( 15,603 )

Accumulated other comprehensive loss ( 23 ) —

Retained earnings 175,898 155,721

4 unchanged sentences

PARENT COMPANY ONLY

CONDENSED STATEMENTS OF INCOME

CONDENSED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands, except share and per share amounts)

1 unchanged sentence

September 30,

2021 2020 2019

Equity in net income of subsidiaries $ 25,505 $ 43,712 $ 45,679

7 unchanged sentences

Net income $ 20,177 $ 40,297 $ 43,121

Other comprehensive (loss), net of tax

Net unrealized (loss) on interest rate swap contract ( 23 ) — —

Other comprehensive (loss) ( 23 ) — —

Comprehensive income $ 20,154 $ 40,297 $ 43,121

Net income per share attributable to common stockholders:

11 unchanged sentences

September 30,

2021 2020 2019

Cash flows from operating activities:

3 unchanged sentences

Gain on sale of equipment — — ( 1 )

Loss (gain) on derivative instruments ( 894 ) 1,397 565

Equity-based compensation expense 3,549 1,570 957

1 unchanged sentence

Deferred income tax (benefit) expense ( 451 ) ( 425 ) 99

Other non-cash adjustments 9

Changes in operating assets and liabilities:

13 unchanged sentences

Proceeds from sale of stock — — 3

Net cash provided by financing activities 34,150 16,393

Net cash (used in) provided by financing activities ( 6,296 ) 34,150 16,393

Net change in cash and cash equivalents ( 12,816 ) 14,094 ( 2,387 )

11 unchanged sentences

The ability of Construction Partners, Inc.’s operating subsidiaries to pay dividends is restricted by the terms of the credit facilities described in Note 11 - Debt.

These condensed parent company-only financial statements have been prepared using the same accounting principles and policies described in the notes to the consolidated financial statements, with the exception that the parent company accounts for its subsidiaries using the equity method.

using the equity method.

These condensed parent company-only financial statements should be read in conjunction with the consolidated financial statements and related notes thereto.

Note 28 - Subsequent Events

Subsequent to September 30, 2020, a subsidiary of the Company acquired the operations of three asphalt and paving companies in North Carolina.

The acquired businesses collectively added eleven hot-mix asphalt plants in North Carolina, providing the Company with access to additional markets and expanding its footprint in the state.

Georgia Reorganization

On October 1, 2021, the Company completed a reorganization of its Georgia operations by merging Everett Dykes Grassing Co., Inc., a wholly-owned subsidiary of the Company, with and into The Scruggs Company, another wholly-owned subsidiary of the Company.

Following the merger, the combined company continues to operate as “The Scruggs Company.”

On October 1, 2021, the Company acquired an asphalt and paving company headquartered in Liberty, South Carolina.

The acquired platform company added three HMA plants in the Greenville, South Carolina metro area, providing opportunities for future expansion in the state.

On October 18, 2021, the Company acquired a grading and site work contractor based in Pensacola, Florida.

The acquisition further enhances the Company’s vertical integration of construction services and supplements the Company’s capabilities in the greater Pensacola, Florida market area following the Company’s initial entry into that market last March.

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

The aggregate purchase price of $ 57.4 million (exclusive of reimbursement to the respective sellers for inventory assets acquired) was paid from cash on hand at closing.

The aggregate purchase price of $ 67.0 million (excluding working capital adjustments) was paid with cash from the Revolving Credit Facility.

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 in the aggregate amount of $ 21.1 million, which is deductible for income tax purposes.

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 in the aggregate amount of approximately $ 35.0 million, which is deductible for income tax purposes.

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

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

Formation of Captive Insurance Company

On October 1, 2021, Construction Partners Risk Management, Inc., a captive insurance company and wholly-owned subsidiary of the Company (the “Captive”) commenced operations.

The purpose of the Captive is to provide general liability, automobile liability and workers’ compensation insurance coverage to the Company and its subsidiaries.

Amendment to Credit Agreement

On October 1, 2021, the Company and each of its wholly-owned subsidiaries entered into an amendment to the Credit Agreement to incorporate certain provisions addressing the Company’s formation and operation of the Captive.

Among other things, the amendment defines the permitted activities of the Captive and provides certain limitations on payments, distributions, investments, indebtedness and other transactions in which the Captive may engage.

The amendment also prescribes the amounts that the Company may invest in the Captive and clarifies that the operations of the Captive will be excluded from the calculation of any financial ratios required by the Credit Agreement.

Restricted Stock Awards

In November 2021, the Company awarded a total of 79,049 restricted shares of Class A common stock to certain employees of the Company under the 2018 Equity Plan.

The grant is classified as an equity award.

The aggregate grant date fair value of these restricted stock awards was $ 3.2 million.

Within that grant, 49,049 of the shares vest in one-fourth increments on September 30 of each calendar year following the calendar year in which the shares were granted.

The remaining 30,000 shares vest in one-half increments on September 30, 2025 and 2026.

Conversion of Class B Common Stock to Class A Common Stock

Subsequent to September 30, 2021, certain stockholders of the Company converted a total of 4,059,569 shares of Class B common stock into shares of Class A common stock on a one -for-one basis.

Following the conversions, there were 40,738,074 shares of Class A common stock and 11,632,270 shares of Class B common stock outstanding.

Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.

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-K

Item 8. Financial Statements and Supplementary Data