What changed in this filing

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Item 1. Financial Statements

2022-02-04 compared with 2021-08-06 · 306 added, 281 removed, 339 unchanged (63% of the section changed)

3 unchanged sentences

(in thousands, except share data)

June 30, September 30,

December 31, September 30,

Current assets:

Cash and cash equivalents $ 35,565 $ 57,251

Short-term restricted cash 6,568 —

Contracts receivable including retainage, net 164,456 158,170

8 unchanged sentences

Investment in joint venture 108 108

Long-term restricted cash 1,728 —

Other assets 7,198 5,534

Deferred income taxes, net 386 386

Total assets $ 872,584 $ 806,620

4 unchanged sentences

Current portion of operating lease liabilities 1,909 1,395

Current maturities of debt 10,000 13,000

Current maturities of long-term debt 10,000 10,000

Accrued expenses and other current liabilities 13,314 26,459

1 unchanged sentence

Long-term liabilities:

Long-term debt, net of current maturities 188,591 79,053

Long-term debt, net of current maturities and deferred debt issuance costs 273,732 206,175

Operating lease liabilities, net of current portion 9,289 5,302

6 unchanged sentences

Preferred stock, par value $ 0.001 ;

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

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

Class A common stock, par value $ 0.001 ;

400,000,000 shares authorized, 36,506,570 shares issued and outstanding at June 30, 2021, and 33,875,884 shares issued and outstanding at September 30, 2020

400,000,000 shares authorized, 41,085,484 shares issued and 41,084,301 shares outstanding at December 31, 2021, and 36,600,639 shares issued and outstanding at September 30, 2021

Class B common stock, par value $ 0.001 ;

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

100,000,000 shares authorized, 14,275,867 shares issued and 11,352,915 shares outstanding at December 31, 2021, and 18,614,791 shares issued and 15,691,839 shares outstanding at September 30, 2021

Additional paid-in capital 250,075 248,571

Treasury stock, at cost, 1,183 shares of Class A common stock, par value $ 0.001

Treasury stock, at cost, 2,922,952 shares of Class B common stock, par value $ 0.001

( 15,603 ) ( 15,603 )

Accumulated other comprehensive income (loss), net 1,422 ( 23 )

Retained earnings 181,409 175,898

3 unchanged sentences

CONSTRUCTION PARTNERS, INC.

CONSOLIDATED STATEMENTS OF INCOME

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

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

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

2021 2020 2021 2020

For the Three Months Ended December 31,

Revenues $ 284,964 $ 190,929

5 unchanged sentences

Interest expense, net ( 1,264 ) ( 468 )

Other income (expense) 252 251 661 360

Other income 116 165

Income before provision for income taxes and earnings from investment in joint venture 7,311 10,540

Provision for income taxes 1,800 2,680

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

Earnings from investment in joint venture — 11

Net income 5,511 7,871

Other comprehensive income, net of tax

Unrealized gain on interest rate swap contract, net 1,445 —

Other comprehensive income 1,445 —

Comprehensive income $ 6,956 $ 7,871

Net income per share attributable to common stockholders:

8 unchanged sentences

(unaudited in thousands, except share data)

For the nine months ended June 30, 2021

For the Three Months Ended December 31, 2021

Class A Common Stock Class B Common Stock Additional

Total Stockholders’ Equity

Accumulated Other Comprehensive Income (Loss), net Total Stockholders’ Equity

Shares Amount Shares Amount

2 unchanged sentences

Equity-based compensation expense — — — — 1,504 — — — 1,504

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

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

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

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

Issuance of stock grant awards 145,921 — — — — — — — —

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

Net income — — — — — — 9,340 9,340

Purchase of treasury stock — — — — — ( 39 ) — — ( 39 )

Other comprehensive income — — — — — — — 1,445 1,445

Conversion of Class B common stock to Class A common stock 4,338,924 4 ( 4,338,924 ) ( 4 ) — — — — —

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

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

For the nine months ended June 30, 2020

December 31, 2021 41,085,484 $ 41 14,275,867 $ 15 $ 250,075 $ ( 15,642 ) $ 181,409 $ 1,422 $ 417,320

For the Three Months Ended December 31, 2020

Class A Common Stock Class B Common Stock Additional

Capital Treasury

Stock Retained

Earnings Total

Stockholders’

Accumulated Other Comprehensive Income (Loss), net Total Stockholders’ Equity

Shares Amount Shares Amount

2 unchanged sentences

Equity-based compensation expense — — — — 395 — — — 395

Conversion of Class B common stock to Class A common stock 107,682 — ( 107,682 ) — — — — —

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

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

Net income — — — — — — 1,537 1,537

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

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

Net income — — — — — — 15,747 15,747

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

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

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

See notes to consolidated financial statements (unaudited).

2 unchanged sentences

(unaudited in thousands)

For the Nine Months Ended June 30,

For the Three Months Ended December 31,

Cash flows from operating activities:

Net income $ 5,511 $ 7,871

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

Depreciation, depletion and amortization of long-lived assets 36,011 29,065

Adjustments to reconcile net income to net cash, cash equivalents and restricted cash provided by operating activities:

Depreciation, depletion, accretion and amortization of long-lived assets 15,903 11,094

Amortization of deferred debt issuance costs and debt discount 57 64

Unrealized (gain) loss on derivative instruments ( 3,141 ) 1,989

Unrealized gain on derivative instruments ( 136 ) ( 1,165 )

Provision for bad debt 113 175

3 unchanged sentences

Distribution of earnings from investment in joint venture — 100

Deferred income taxes — ( 197 )

Deferred income tax benefit ( 295 ) —

Other non-cash adjustments 33 ( 21 )

Changes in operating assets and liabilities, net of acquisition:

Changes in operating assets and liabilities, net of acquisitions:

Contracts receivable including retainage, net 776 18,538

7 unchanged sentences

Other long-term liabilities 1,455 ( 130 )

Net cash provided by operating activities, net of acquisitions 9,334 51,414

Net cash (used in) provided by operating activities, net of acquisition ( 577 ) 709

Cash flows from investing activities:

2 unchanged sentences

Business acquisitions, net of cash acquired ( 65,901 ) ( 84,086 )

Return of investment in joint venture — 361

Net cash used in investing activities ( 80,274 ) ( 94,056 )

Cash flows from financing activities:

Proceeds from issuance of long-term debt, net of debt issuance costs and discount 199,198 42,719

Proceeds from revolving credit facility 70,000 —

Repayments of long-term debt ( 2,500 ) ( 3,250 )

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

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

Cash and cash equivalents:

Beginning of period 148,316 80,619

End of period $ 134,468 $ 78,695

Purchase of treasury stock ( 39 ) —

Net cash provided by (used in) financing activities 67,461 ( 3,250 )

Net change in cash, cash equivalents and restricted cash ( 13,390 ) ( 96,597 )

Cash, cash equivalents and restricted cash:

Cash, cash equivalents and restricted cash, beginning of period 57,251 148,316

Cash, cash equivalents and restricted cash, end of period $ 43,861 $ 51,719

Supplemental cash flow information:

Cash paid for interest $ 1,608 $ 672

Cash paid for income taxes $ 3,568 $ 5,600

Operating lease right-of-use assets obtained in exchange for operating lease liabilities $ 1,089 $ 1,241

Cash paid for operating lease liabilities $ 565 $ 748

Non-cash items:

Property, plant and equipment included with accounts payable at period end $ 778 $ 1,073

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

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

Operating lease right-of-use assets obtained in exchange for operating lease liabilities $ 4,991 $ 282

Property, plant and equipment financed with accounts payable $ 6,256 $ 1,549

See notes to consolidated financial statements (unaudited).

5 unchanged sentences

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.

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

The 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, has owned a controlling interest in the Company’s stock since the Company’s inception.

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.

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

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The preparation of the consolidated financial statements in conformity with 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;

2 unchanged sentences

Additional critical accounting policies and the underlying judgments and uncertainties are described in the notes to the Company’s annual consolidated financial statements included in the 2021 Form 10-K.

Emerging Growth Company

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

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

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

Cash and Cash Equivalents

3 unchanged sentences

The Company maintains demand accounts, money market accounts and certificates of deposit at several banks.

From time to time, the account balances have exceeded the maximum available federal deposit insurance coverage limit.

From time to time, account balances have exceeded the maximum available federal deposit insurance coverage limit.

The Company has not experienced any losses in such accounts and regularly monitors its credit risk.

Restricted Cash

Restricted cash represents cash held in a fiduciary capacity by the Captive for the payment of casualty insurance claims for the Company's subsidiaries.

The Company had short-term restricted cash of $ 6.6 million and $ 0.0 million at December 31, 2021 and September 30, 2021, respectively, and long-term restricted cash of $ 1.7 million and $ 0.0 million at December 31, 2021 and September 30, 2021, respectively.

Contracts Receivable Including Retainage, Net

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

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.

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

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

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

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.

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

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, current economic conditions, historical losses and other information available to management.

1 unchanged sentence

Contract Assets and Contract Liabilities

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

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

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

1 unchanged sentence

The contract asset, “Costs and estimated earnings in excess of billings on uncompleted contracts,” arises when the Company recognizes revenues for services performed under its construction projects, but the Company is not yet entitled to bill the customer under the terms of the contract.

Amounts billed to customers are excluded from this asset and reflected on the Consolidated Balance Sheets as “Contracts receivable including retainage, net”.

Included in costs and estimated earnings in excess of billings on uncompleted contracts are amounts the Company seeks or will seek to collect from customers or others for (i) errors, (ii) changes in contract specifications or design, (iii) contract change orders in dispute, unapproved as to scope and price, or (iv) other customer-related causes of unanticipated additional contract costs (such as claims).

Amounts billed to customers are excluded from this asset and reflected on the Consolidated Balance Sheets as “Contracts receivable including retainage, net.” Included in costs and estimated earnings in excess of billings on uncompleted contracts are amounts the Company seeks or will seek to collect from customers or others for (i) errors, (ii) changes in contract specifications or design, (iii) contract change orders in dispute, unapproved as to scope and price, or (iv) other customer-related causes of unanticipated additional contract costs (such as claims).

Such amounts are recorded to the extent that the amount can be reasonably estimated and recovery is probable.

Claims and unapproved change orders made by the Company may involve negotiation and, in rare cases, litigation.

Unapproved change orders and claims also involve the use of estimates, and revenues associated with unapproved change orders and claims are included in the transaction price to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty is resolved.

Unapproved change orders and claims also involve the use of estimates, and revenues associated with unapproved change orders and claims 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.

The Company did not recognize any material amounts associated with claims and unapproved change orders during the periods presented.

The contract liability, “Billings in excess of costs and estimated earnings on uncompleted contracts,” represents the Company’s obligation to transfer to a customer goods or services for which the Company has been paid by the customer or for which the Company has billed the customer under the terms of the contract.

The contract liability, “Billings in excess of costs and estimated earnings on uncompleted contracts,” represents the Company’s obligation to transfer goods or services to a customer for which the Company has been paid by the customer or for which the Company

has billed the customer under the terms of the contract.

Revenue for future services reflected in this account are recognized, and the liability is reduced, as the Company subsequently satisfies the performance obligation under the contract.

1 unchanged sentence

Concentration of Risks

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

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

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

4 unchanged sentences

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

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

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

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

% of Consolidated Revenues

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

2021 2020 2021 2020

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

Projects performed for various departments of transportation accounted for 33.5 % and 27.8 % of consolidated revenues for the three months ended December 31, 2021 and 2020, respectively.

Customers that accounted for more than 10% of consolidated revenues during the three months ended December 31, 2021 and 2020 are presented below:

% of Consolidated Revenues for the Three Months Ended December 31,

Alabama Department of Transportation 10.1 % 7.2 %

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

Florida Department of Transportation 10.0 % 8.8 %

Revenues from Contracts with Customers

1 unchanged sentence

These projects are performed for a mix of federal, state, municipal and private customers.

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

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

% of Consolidated Revenues

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

2021 2020 2021 2020

Private 38.5 % 30.9 % 40.0 % 36.1 %

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

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

% of Consolidated Revenues for the Three Months Ended December 31,

Public 61.0 % 59.4 %

Revenues derived from construction projects are recognized over time as the Company satisfies its performance obligations by transferring to the customer control of the asset created or enhanced by the project.

Private 39.0 % 40.6 %

Revenues derived from construction projects are recognized over time as the Company satisfies its performance obligations by transferring control of the asset created or enhanced by the project to the customer.

Recognition of revenues and cost of revenues for construction projects requires significant judgment by management, including, among other things, estimating total costs expected to be incurred to complete a project and measuring progress toward completion.

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When the Company incurs additional costs related to work performed by subcontractors, the Company may be able to utilize contractual provisions to back charge the subcontractors for those costs.

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

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

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

8 unchanged sentences

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

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

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.

The Company accounts for changes to the estimated transaction price using a cumulative catch-up adjustment.

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This is because goods and services promised under change orders are generally not distinct from the remaining goods and services under the existing contract, due to the significant integration of services performed in the context of the contract.

Accordingly, change orders are generally accounted for as a modification of the existing contract and a single performance obligation.

The Company accounts for the modification using a cumulative catch-up adjustment.

Accordingly, change orders are generally accounted for as a modification of the existing contract and single performance obligation.

We account for the modification using a cumulative catch-up adjustment.

Either the Company or its customers may initiate change orders, which may include changes in specifications or designs, manner of performance, facilities, equipment, materials, sites and period of completion of the work.

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

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

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 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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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 in which the change is enacted.

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.

Management evaluates the realization of deferred tax assets and establishes a valuation allowance when it is more likely than not that all or a portion of the deferred tax assets will not be realized.

Deferred tax assets and deferred tax liabilities are presented on a net basis by taxing authority and classified as non-current on the Consolidated Balance Sheets.

The Company classifies income tax-related interest and penalties as interest expense and other expenses, respectively.

Earnings per Share

1 unchanged sentence

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.

Derivative Instruments

The Company’s derivative instruments consist of commodity and interest rate swap contracts.

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

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

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

Fair Value Measurements

The Company measures and discloses certain financial assets and liabilities at fair value.

ASC Topic 820, Fair Value Measurements and Disclosures ("ASC 820"), defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

Inputs used to measure fair value are classified using the following hierarchy:

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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 June 30, 2021 and September 30, 2020.

The Company’s financial instruments include cash and cash equivalents, restricted cash, contracts receivable including retainage, accounts payable and accrued expenses reflected as current assets and current liabilities on its Consolidated Balance Sheets at December 31, 2021 and September 30, 2021.

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

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

The carrying value of amounts outstanding under these credit facilities is reflected as long-term debt, net of current maturities and current maturities of debt on the Company’s Consolidated Balance Sheets at June 30, 2021 and September 30, 2020.

The Company also has a Term Loan and a Revolving Credit Facility, as described in Note 8 - Debt.

The carrying value of amounts outstanding under these credit facilities is reflected as long-term debt, net of current maturities and current maturities of long-term debt on the Company’s Consolidated Balance Sheets at December 31, 2021 and September 30, 2021.

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

The Company also has derivative instruments.

The fair value of derivative instruments is based on forward and spot prices, as described in Note 16 - Fair Value Measurements.

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

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.

The fair value of commodity and interest rate swaps are based on forward and spot prices, as described in Note 16 - Fair Value Measurements.

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.

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 19 - Other Comprehensive Income.

Note 3 - Accounting Standards

Recently Adopted Accounting Pronouncements

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

New Accounting Pronouncements

In December 2019, the Financial Accounting Standards Board ("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 adopted this guidance effective October 1, 2021 as required and noted no 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 have a material impact on the Company’s consolidated financial statements.

Note 4 - Business Acquisitions

North Carolina Acquisitions

During the three months ended December 31, 2021, a subsidiary of the Company purchased four HMA production and paving companies 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, and (iv) on December 18, 2020, in Kitty Hawk, North Carolina .

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

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

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

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 the heading “Fair Value Measurements” above in Note 2 - Significant Accounting Policies.

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

On October 1, 2021, the Company acquired all of the capital stock of King Asphalt, Inc., a HMA production and paving company headquartered in Liberty, South Carolina.

The transaction established the Company's first platform company in South Carolina and added three HMA plants in the Greenville, South Carolina metro area.

On October 18, 2021, the Company acquired substantially all of the assets of J.

Miller Construction Inc., a grading and site work company headquartered in Pensacola, Florida.

The transaction enhanced the Company’s vertical integration of construction services and supplemented the Company’s capabilities in the greater Pensacola, Florida market area.

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.

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

Identifiable tangible 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 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 $ 35.6 million, which is deductible for income tax purposes.

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

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

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

For these acquisitions, total consideration was $ 67.1 million, which was paid with cash on hand as of December 31, 2021.

The total consideration has been provisionally allocated as follows:

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

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

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

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

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

For the Three Months Ended June 30,

Pro forma revenues $ 268,401 $ 255,186

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

For the Nine Months Ended June 30,

$ 1.2 million of cash and cash equivalents, $ 7.2 million of contracts receivable including retainage, net, $ 0.1 million of costs and estimated earnings in excess of billings on uncompleted contracts, $ 1.4 million of inventory, $ 0.5 million of prepaid expenses and other current assets, $ 2.8 million of accounts payable, $ 0.4 million of billings in excess of costs and estimated earnings on uncompleted contracts, $ 0.6 million of accrued expenses and other current liabilities, $ 24.9 million of property, plant and equipment and $ 35.6 million of goodwill.

Combined Acquisitions During the Three Months Ended December 31, 2021

The Consolidated Statements of Comprehensive Income includes $ 14.6 million of revenue and $ 0.3 million of net loss attributable to the operations of these acquisitions for the three months ended December 31, 2021 from their respective acquisition dates.

The Company recorded certain costs to effect the acquisitions 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 $ 0.2 million for the three months ended December 31, 2021.

The following presents pro forma revenues and net income as though the acquisitions had occurred on October 1, 2020 (unaudited, in thousands):

For the Three Months Ended December 31,

Pro forma revenues $ 285,247 $ 205,203

Pro forma net income $ 5,685 $ 8,706

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

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, 2020, 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 three months ended December 31, 2021 and 2020.

(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, 2020 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 prices were borrowed on October 1, 2020.

Interest expense calculations further assume that no principal payments were made during the period from October 1, 2020 through December 31, 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, 2020 through December 31, 2021.

(d) Exclude $ 0.2 million of acquisition-related expenses from the three months ended December 31, 2021, as though such expenses were incurred prior to the pro forma acquisition date of October 1, 2020.

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, 2020.

Provisional Accounting

In July 2021, the Company acquired a HMA contracting company and related entities, all headquartered in Cullman, Alabama.

In August 2021, the Company acquired a crushed stone and aggregates facility located near Goldston, North Carolina.

As of December 31, 2021, there have been no material adjustments to the September 30, 2021 provisional accounting for either acquisition.

Note 5 - Contracts Receivable Including Retainage, Net

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

June 30, 2021 September 30, 2020

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

December 31, 2021 September 30, 2021

Contracts receivable $ 134,785 $ 132,456

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Note 6 - Contract Assets and Liabilities

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

June 30, 2021 September 30, 2020

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

December 31, 2021 September 30, 2021

Costs on uncompleted contracts $ 1,190,288 $ 1,058,434

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Net billings in excess of costs and estimated earnings on uncompleted contracts $ ( 16,792 ) $ ( 10,696 )

Significant changes to balances of costs and estimated earnings in excess of billings (contract asset) and billings in excess of costs and estimated earnings (contract liability) on uncompleted contracts from September 30, 2020 to June 30, 2021 are presented below (in thousands):

Significant changes to balances of costs and estimated earnings in excess of billings (contract asset) and billings in excess of costs and estimated earnings (contract liability) on uncompleted contracts from September 30, 2021 to December 31, 2021 are presented below (in thousands):

Costs and Estimated Earnings in Excess of Billings on

3 unchanged sentences

Changes in revenue billed, contract price or cost estimates ( 1,063 ) ( 5,033 ) ( 6,096 )

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

At June 30, 2021, the Company had unsatisfied or partially unsatisfied performance obligations under construction project contracts representing approximately $ 627.5 million in aggregate transaction price.

The Company expects to earn revenue as it satisfies its performance obligations under those contracts in the amount of approximately $ 282.3 million during the remainder of the fiscal year ending September 30, 2021 and $ 345.2 million thereafter.

December 31, 2021 (unaudited) $ 21,960 $ ( 38,752 ) $ ( 16,792 )

At December 31, 2021, the Company had unsatisfied or partially unsatisfied performance obligations under construction project contracts representing approximately $ 801.0 million in aggregate transaction price.

The Company expects to earn revenue as it satisfies its performance obligations under such contracts in the amount of approximately $ 618.4 million during the remainder of the fiscal year ending September 30, 2022 and $ 182.6 million thereafter.

Note 7 - Property, Plant and Equipment

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

June 30, 2021 September 30, 2020

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

December 31, 2021 September 30, 2021

Construction equipment $ 357,051 $ 333,966

Plants 149,441 143,172

Mineral reserves 86,827 86,556

Land and improvements 57,096 53,415

Quarry reserves 24,378 22,092

Buildings 27,463 27,163

5 unchanged sentences

Total property, plant and equipment, net $ 428,965 $ 404,832

Depreciation and depletion expense related to property, plant and equipment was $ 12.4 million and $ 10.0 million for the three months ended June 30, 2021 and 2020, respectively, and $ 35.6 million and $ 28.9 million for the nine months ended June 30, 2021 and 2020, respectively.

Depreciation, depletion, and amortization expense related to property, plant and equipment for the three months ended December 31, 2021 and 2020 was $ 15.8 million and $ 11.0 million, respectively.

Note 8 - Debt

Since 2017, the Company and each of its subsidiaries have been parties to a credit agreement with certain 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.

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.

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

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

June 30, 2021 September 30, 2020

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

December 31, 2021 September 30, 2021

Long-term debt:

4 unchanged sentences

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

Long-term debt, net of current maturities $ 188,591 $ 79,053

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

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

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

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

Subject to various requirements, the Company generally may (and, under certain circumstances, must), prepay all or a portion of the outstanding balance

of the advances, together with accrued interest thereon, prior to their contractual maturity.

The obligations of the Company and its subsidiaries under the Credit Agreement are secured by a first priority security interest in substantially all of the Company’s assets.

Long-term debt, net of current maturities and deferred debt issuance costs $ 273,732 $ 206,175

Note 9 - 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.

5 unchanged sentences

Conversion of Class B Common Stock to Class A Common Stock

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

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

During the three months ended December 31, 2021, certain stockholders of the Company converted a total of 4,338,924 shares of Class B common stock into shares of Class A common stock on a one -for-one basis.

As of December 31, 2021, there were 41,084,301 shares of Class A common stock and 11,352,915 shares of Class B common stock outstanding.

Treasury Stock

During the three months ended December 31, 2021, the Company received a total of 1,183 shares of Class A common stock from employees for reimbursement of income taxes paid by the Company on behalf of these employees related to the vesting of restricted stock awards.

Restricted Stock Awards

During the nine months ended June 30, 2021, the Company awarded a total of 510,733 restricted shares of Class A common stock to Company management under the Construction Partners, Inc.

During the three months ended December 31, 2021, the Company awarded a total of 145,921 restricted shares of Class A common stock to certain directors, officers and employees of the Company under the Construction Partners, Inc.

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

3 unchanged sentences

Because the only differences between the two classes of common stock are related to voting rights, conversion rights and transfer restrictions applicable to shares of Class B common stock, the Company has not presented earnings per share under the two-class method, as the earnings per share are the same for both Class A common stock and Class B common stock.

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

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

2021 2020 2021 2020

Net income (loss) attributable to common shareholders $ 9,340 $ 15,747 $ 12,276 $ 22,745

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

For the Three Months Ended December 31,

Net income attributable to common shareholders $ 5,511 $ 7,871

Weighted average number of common shares outstanding, basic 51,696,004 51,489,211

Net income (loss) per common share attributable to common shareholders, basic $ 0.18 $ 0.31 $ 0.24 $ 0.44

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

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

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

2021 2020 2021 2020

Net income (loss) attributable to common stockholders $ 9,340 $ 15,747 $ 12,276 $ 22,745

For the Three Months Ended December 31,

Net income attributable to common stockholders $ 5,511 $ 7,871

Weighted average number of basic common shares outstanding, basic 51,696,004 51,489,211

Effect of dilutive securities:

Restricted stock grants under 2018 Equity Incentive Plan 177,668 157,174 106,852 134,416

Restricted stock grants 281,970 228,637

Weighted average number of diluted common shares outstanding:

Net income (loss) per diluted common share attributable to common stockholders $ 0.18 $ 0.30 $ 0.24 $ 0.44

51,977,974 51,717,848

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

Note 11 - Provision for Income Taxes

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

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

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

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

The Company’s effective income tax rate for the three months ended December 31, 2021 and 2020 was 24.6 % and 25.4 %, respectively.

The effective income tax rate for the three months ended December 31, 2021 was favorably impacted by the filing of an amended state return.

Note 12 - Related Parties

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

At June 30, 2021, $ 0.1 million and $ 0.5 million was reflected on the Company’s Consolidated Balance Sheets within other current assets and other assets, respectively, representing the remaining balances on this note receivable.

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

At June 30, 2021, $ 0.1 million and $ 0.3 million was reflected on the Company’s Consolidated Balance Sheets within other current assets and other assets, respectively, representing the remaining balances on this note receivable.

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

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 a note receivable in the amount of $ 1.0 million, which approximated the net book value of the disposed entity.

At December 31, 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 a 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 December 31, 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.

The notes do not bear interest, and 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.

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• 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 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.

The following table presents revenues earned and expenses incurred by the Company during the three and nine months ended June 30, 2021 and 2020, and accounts receivable and payable balances at June 30, 2021 and September 30, 2020, related to transactions with the related parties described above (in thousands):

The following table presents revenues earned and expenses incurred by the Company during the three months ended December 31, 2021 and 2020, and accounts receivable and payable balances at December 31, 2021 and September 30, 2021, related to transactions with the related parties described above (in thousands):

Revenue Earned (Expense Incurred) Accounts Receivable (Payable)

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

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

2021 2020 2021 2021

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

(unaudited) (unaudited) (unaudited)

Purchaser of Subsidiary $ — $ — $ 518 $ 518

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Subcontracting Services ( 2,239 ) (1)

Construction Services 17 (2) — (2) 136 (2) 1,534 (2) 208 123

( 2,178 ) (1)

Island Pond ( 80 ) (2)

Vehicles - Purchases ( 128 ) (3) ( 525 ) (3) ( 536 ) (3) ( 639 ) (3) — —

Vehicles - Rent Expense ( 31 ) (2) ( 161 ) (2) ( 158 ) (2) ( 562 ) (2) — —

Consulting Services — (2) ( 76 ) (2) ( 32 ) (2) ( 219 ) (2) — —

SunTx ( 375 ) (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 and 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.

Note 13 - Equity-Based Compensation

During the fiscal year ended September 30, 2019, the Company awarded a total of 292,534 restricted shares of Class A common stock to its non-employee directors under the Equity Incentive Plan in lieu of any cash compensation.

Restricted Stock Awards

During the three months ended December 31, 2021 and 2020, the Company recorded $ 0.4 million of compensation expense in connection with fiscal year 2019 grants, which is reflected as general and administrative expenses in the Company’s Consolidated Statements of Comprehensive Income.

At December 31, 2021, there was no unrecognized compensation expense related to these 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 Equity Incentive Plan.

The grants are classified as equity awards.

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

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

At June 30, 2021, there was approximately $ 0.7 million of unrecognized compensation expense related to these awards.

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

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

During the three months ended December 31, 2021 and 2020, the Company recorded compensation expense in connection with these grants in the amount of $ 0.9 million and $ 0.0 million , respectively, which is reflected as general and administrative expenses in the Company’s Consolidated Statements of Comprehensive Income.

At December 31, 2021, there was approximately $ 10.5 million of unrecognized compensation expense related to these awards.

During the three months ended December 31, 2021, the Company awarded a total of 145,921 restricted shares of Class A common stock to certain directors, officers and employees under the Equity Incentive Plan.

The grants are classified as equity awards.

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

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

At June 30, 2021, there was approximately $ 12.4 million of unrecognized compensation expense related to these awards.

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

The aggregate grant date fair value of these restricted stock awards was $ 5.2 million.

During the three months ended December 31, 2021 and 2020, the Company recorded compensation expense in connection with these grants in the amount of $ 0.2 million and $ 0.0 million , respectively, which is reflected as general and administrative expenses in the Company’s Consolidated Statements of Comprehensive Income.

At December 31, 2021, there was approximately $ 5.0 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

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

As of June 30, 2021, operating leases under ASC Topic 842, Leases, were included in (i) operating lease right-of use assets, (ii) current portion of operating lease liabilities and (iii) operating lease liabilities, net of current portion on the Company’s Consolidated Balance Sheets in the amounts of $ 6.7 million, $ 1.5 million and $ 5.3 million, respectively.

As of June 30, 2021, the Company had no lease contracts that had not yet commenced but had created significant rights and obligations.

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

For the Three Months Ended June 30,

(unaudited) (unaudited)

Operating lease cost $ 593 $ 875

Short-term lease cost 3,732 3,229

Total lease expense $ 4,325 $ 4,104

For the Nine Months Ended June 30,

(unaudited) (unaudited)

As of December 31, 2021, operating leases under ASC Topic 842, Leases (“Topic 842”) were included in (i) operating lease right-of use assets, (ii) current portion of operating lease liabilities and (iii) operating lease liabilities, net of current portion on the Company’s Consolidated Balance Sheets in the amounts of $ 11.0 million, $ 1.9 million and $ 9.3 million, respectively.

As of December 31, 2021, the Company did not have any lease contracts that had not yet commenced but had created significant rights and obligations.

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

For the Three Months Ended December 31,

Operating lease cost $ 597 $ 800

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Total lease expense $ 4,690 $ 3,290

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

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

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

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

These leases are entered into at periodic rental rates for an unspecified duration and typically have a termination for convenience provision.

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

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

As of June 30, 2021, the lease liability was equal to the present value of the remaining lease payments, discounted using the incremental borrowing rate on the Company’s secured debt using a single maturity discount rate, as such rate is not materially different from the discount rate applied to each of the leases in the portfolio.

The following table summarizes the Company’s undiscounted lease liabilities outstanding as of June 30, 2021 (in thousands):

Fiscal Year Amount (unaudited)

As of December 31, 2021, the weighted-average remaining term of the Company’s leases was 7.8 years, and the weighted-average discount rate was 3.40 %.

As of December 31, 2021, the lease liability was equal to the present value of the remaining lease payments, discounted using the incremental borrowing rate on the Company’s secured debt using a single maturity discount rate, as such rate is not materially different from the discount rate applied to each of the leases in the portfolio.

The following table summarizes the Company’s undiscounted lease liabilities outstanding as of December 31, 2021 (unaudited, in thousands):

Fiscal Year Amount

Remainder of 2022 $ 1,669

3 unchanged sentences

Total $ 11,198

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 was $ 0.3 million for the three months ended June 30, 2021 and 2020 and $ 0.7 million and $ 0.8 million for the nine months ended June 30, 2021 and 2020, respectively.

Note 15 - Investment in Derivative Instruments

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 its 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 Hypothetical Derivative Method compares the change in fair value or cash flows of the hedging instrument with the change in fair value or cash flows of a hypothetical derivative that represents the hedged risk.

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.

At June 30, 2021, the aggregate notional value of these interest rate swap agreements was $ 40.3 million.

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

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

Change in Change in

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

Cost of revenues $ 302 $ 632 $ 934 $ 257 $ 2,390 $ 2,647

Interest expense, net ( 163 ) 132 ( 31 ) ( 511 ) 751 240

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

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

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 three months ended December 31, 2021 and 2020 and the fair value of these derivatives as of December 31, 2021 and September 30, 2021 (in thousands):

For the Three Months Ended December 31,

Change in Change in

3 unchanged sentences

Total $ 15 $ 136 $ 151 $ ( 319 ) $ 1,165 $ 846

June 30, 2021 September 30, 2020

December 31, 2021 September 30, 2021

Balance Sheet Classification (unaudited)

Prepaid expenses and other current assets $ 1,203 $ —

Other assets 684 —

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

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

Prepaid expenses and other current assets - commodity swaps $ 1,535 $ 990

Other assets - commodity swaps — 822

Other assets - interest rate swaps (1)

Accrued expense and other current liabilities - interest rate swaps ( 51 ) ( 97 )

Other long-term liabilities - interest rate swaps (2)

Net unrealized gain (loss) position $ 930 $ ( 2,211 )

( 350 ) ( 748 )

Net unrealized gain position $ 3,051 $ 967

(1) Includes designated cash flow hedge of $ 1,917 and $ 0 as of December 31, 2021 and September 30, 2021, respectively.

(2) Includes designated cash flow hedge of $ 0 and $( 31 ) as of December 31, 2021 and September 30, 2021, respectively.

Note 16 - Fair Value Measurements

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

June 30, 2021 September 30, 2020

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

December 31, 2021 September 30, 2021

Level 2 Level 2

Commodity swaps $ 1,887 $ —

Commodity swaps $ — $ 503

Commodity swap contracts $ 1,535 $ 1,812

Interest rate swaps 1,917 —

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

The fair values of the Company’s 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.

Note 17 - Purchase Commitments

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

As of June 30, 2021, the Company’s purchase commitments for the remainder of fiscal year 2021 and annually thereafter were as follows (in thousands):

Fiscal Year Amount (unaudited)

Interest rate swap contracts $ 401 $ 845

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 17 - Commitments

Letters of Credit

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 December 31, 2021, the Company had aggregate letters of credit outstanding in the amount of $ 11.3 million, primarily related to certain insurance policies as described in Note 2 - Significant Accounting Policies.

Purchase Commitments

As of December 31, 2021, the Company had unconditional purchase commitments for diesel fuel in the normal course of business in the aggregate amount of $ 3.4 million.

Management does not expect any significant changes in the market value of these goods during the commitment period that would have a material adverse effect on the financial condition, results of operations and cash flows of the Company.

As of December 31, 2021, our purchase commitments annually thereafter are as follows (in thousands):

Fiscal Year Amount

Remainder of 2022 $ 1,969

Total $ 3,422

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 December 31, 2021 in the amount of $ 2.3 million, due as follows (in thousands):

Fiscal Year Amount

Remainder of 2022 $ 234

Thereafter 1,460

Total $ 2,340

Royalty expense recorded in cost of revenue during the three months ended December 31, 2021 and 2020 was $ 0.3 million and $ 0.2 million, respectively.

Note 18 - COVID-19 Pandemic

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

While the Company did not incur significant disruptions in its operations from the COVID-19 pandemic during the three and nine months ended June 30, 2021, due to the uncertainties surrounding the COVID-19 pandemic, it is unable to predict the impact that the COVID-19 pandemic will have on its financial position, operating results and cash flows in future periods.

Note 19 - Legal Proceedings

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

On April 26, 2021, the Company entered into a settlement agreement with a former stockholder of the Company relating to claims arising out of the former stockholder’s sale of shares of the Company’s common stock in a private transaction prior to the Company's initial public offering.

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

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

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

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

Note 19 - 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 December 31, 2021 and September 30, 2021, are as follows (in thousands):

AOCI December 31, 2021 (unaudited) September 30, 2021

Interest rate swap contract $ 1,422 $ ( 23 )

Total 1,422 ( 23 )

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

AOCI Interest Rate Hedge

Balance at September 30, 2020 $ —

Net OCI changes —

Balance at December 31, 2020 $ —

AOCI Interest Rate Hedge

Balance at September 30, 2021 $ ( 23 )

Net OCI changes 1,445

Balance at December 31, 2021 $ 1,422

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

For the Three Months Ended December 31,

Interest expense $ 332 $ —

Benefit from income taxes ( 86 ) —

Total reclassifications from AOCI to earnings $ 246 $ —

Note 20 - Subsequent Events

Alabama Acquisition

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

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

North Carolina Acquisition

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

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

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

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

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

In each case, the provisional allocation of the purchase price to assets acquired and liabilities assumed, based on their estimated fair values at the acquisition date, was determined in accordance with the methodology described under Fair Value Measurements above in Note 2 - Significant Accounting Policies.

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

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

Restricted Stock Awards

On January 7, 2022, the Company awarded a total of 107,738 restricted shares of Class A common stock to certain directors and employees of the Company under the Equity Incentive Plan.

The grants are classified as equity awards.

The aggregate grant date fair value of these restricted stock awards was $ 3.1 million.

The shares of restricted stock vest as follows:

Fiscal Year Number of Shares

Total 107,738

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements