What changed in this filing

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Item 1. Financial Statements

2022-05-06 compared with 2022-02-04 · 193 added, 144 removed, 501 unchanged (40% of the section changed)

3 unchanged sentences

(in thousands, except share data)

December 31, September 30,

March 31, September 30,

Current assets:

Cash and cash equivalents $ 29,608 $ 57,251

Short-term restricted cash 6,568 —

Restricted cash 1,721 —

Contracts receivable including retainage, net 170,739 158,170

8 unchanged sentences

Investment in joint venture 108 108

Long-term restricted cash 1,728 —

Restricted investments 6,203 —

Other assets 14,392 5,534

18 unchanged sentences

Preferred stock, par value $ 0.001 ;

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

10,000,000 shares authorized at March 31, 2022 and September 30, 2021 and no shares issued and outstanding

Class A common stock, par value $ 0.001 ;

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

400,000,000 shares authorized, 41,193,222 shares issued and 41,192,039 outstanding at March 31, 2022 and 36,600,639 issued and outstanding at September 30, 2021

Class B common stock, par value $ 0.001 ;

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

100,000,000 shares authorized, 14,275,867 shares issued and 11,352,915 outstanding at March 31, 2022 and 18,614,791 shares issued and 15,691,839 outstanding at September 30, 2021

Additional paid-in capital 251,817 248,571

10 unchanged sentences

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

For the Three Months Ended December 31,

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

2022 2021 2022 2021

Revenues $ 243,385 $ 179,112 $ 528,349 $ 370,041

3 unchanged sentences

Gain on sale of equipment, net 1,014 9 1,455 342

Operating income 8,459 10,843

Operating income (loss) ( 11,489 ) ( 6,394 ) ( 3,030 ) 4,449

Interest expense, net ( 859 ) ( 298 ) ( 2,123 ) ( 766 )

Other income 43 244 159 409

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

Income (loss) before provision for income taxes and earnings from investment in joint venture ( 12,305 ) ( 6,448 ) ( 4,994 ) 4,092

Provision for income taxes ( 2,887 ) ( 1,513 ) ( 1,087 ) 1,167

Earnings from investment in joint venture — — — 11

Net income 5,511 7,871

Net income (loss) ( 9,418 ) ( 4,935 ) ( 3,907 ) 2,936

Other comprehensive income, net of tax

Unrealized gain on interest rate swap contract, net 5,580 — 7,025 —

Unrealized loss on restricted investments, net ( 122 ) — ( 122 ) —

Other comprehensive income 5,458 — 6,903 —

Comprehensive income $ 6,956 $ 7,871

Net income per share attributable to common stockholders:

Comprehensive income (loss) $ ( 3,960 ) $ ( 4,935 ) $ 2,996 $ 2,936

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

Basic $ ( 0.18 ) $ ( 0.10 ) $ ( 0.08 ) $ 0.06

7 unchanged sentences

(unaudited in thousands, except share data)

For the Three Months Ended December 31, 2021

For the six months ended March 31, 2022

Class A Common Stock Class B Common Stock Additional

4 unchanged sentences

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

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

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

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

2 unchanged sentences

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

Net income (loss) — — — — — — ( 9,418 ) — ( 9,418 )

Equity-based compensation expense — — — — 1,742 — — — 1,742

Issuance of stock awards 107,738 — — — — — — — —

Other comprehensive income — — — — — — — 5,458 5,458

March 31, 2022 41,193,222 $ 41 14,275,867 $ 15 $ 251,817 $ ( 15,642 ) $ 171,991 $ 6,880 $ 415,102

For the six months ended March 31, 2021

Class A Common Stock Class B Common Stock Additional

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

Capital Treasury

Stock Retained

Earnings Accumulated Other Comprehensive Income (Loss), net Total

Stockholders’

Shares Amount Shares Amount

3 unchanged sentences

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

Net income — — — — — — ( 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 awards 510,733 — — — — — — — —

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

See notes to consolidated financial statements (unaudited).

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(unaudited in thousands)

For the Three Months Ended December 31,

For the Six Months Ended March 31,

Cash flows from operating activities:

Net income $ 5,511 $ 7,871

Net income (loss) $ ( 3,907 ) $ 2,936

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

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Other non-cash adjustments 39 ( 24 )

Changes in operating assets and liabilities, net of acquisitions:

Contracts receivable including retainage, net 776 18,538

Changes in operating assets and liabilities, net of acquisition:

Contracts receivable including retainage ( 3,821 ) 6,263

Costs and estimated earnings in excess of billings on uncompleted contracts ( 1,261 ) ( 9,802 )

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Other long-term liabilities 3,067 ( 240 )

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

Net cash provided by operating activities, net of acquisitions 3,294 2,398

Cash flows from investing activities:

2 unchanged sentences

Business acquisitions, net of cash acquired ( 102,893 ) ( 84,494 )

Purchase of restricted investments ( 6,358 ) —

Net cash used in investing activities ( 140,177 ) ( 110,465 )

4 unchanged sentences

Net cash provided by (used in) financing activities 110,961 ( 6,500 )

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

Net change in cash and cash equivalents ( 25,922 ) ( 114,567 )

Cash, cash equivalents and restricted cash:

3 unchanged sentences

Cash paid for interest $ 3,375 $ 1,303

Cash paid for income taxes $ 1,076 $ 3,318

Operating lease right-of-use assets obtained in exchange for operating lease liabilities $ 5,983 $ 615

Cash paid for operating lease liabilities $ 1,144 $ 1,234

Non-cash items:

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

Property, plant and equipment included with accounts payable at period end $ 1,042 $ 1,663

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

Amounts payable to seller in business combination $ 600 $ 250

See notes to consolidated financial statements (unaudited).

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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, 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 used in accounting for items such as recognition of revenues and cost of revenues, marketable securities, 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 and the fair value of equity-based compensation awards.

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

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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.

The Company had restricted cash of $ 1.7 million and $ 0.0 million at March 31, 2022 and September 30, 2021, respectively.

Restricted Investments

The Company's restricted investments consist of debt securities, which are held in a fiduciary capacity by the Captive for the payment of casualty insurance claims for the Company's subsidiaries.

The Company determines the classification of its securities at the time of purchase and re-evaluates the determination at each balance sheet date.

The Company has classified these securities as available-for-sale.

As a result, these securities are carried at their fair value based on quoted market prices.

Unrealized gains and losses are reported as components of accumulated other comprehensive income (loss), net.

These securities have been classified as non-current assets, based on their respective maturity dates.

The Company had restricted investments of $ 6.2 million and $ 0.0 million at March 31, 2022 and September 30, 2021, respectively.

Contracts Receivable Including Retainage, Net

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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.

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.

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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 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.

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

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

No single customer accounted for more than 10% of the Company’s contracts receivable including retainage, net balance at March 31, 2022 or September 30, 2021.

Projects performed for various departments of transportation accounted for 30.8 % and 26.1 % of consolidated revenues for the three months ended March 31, 2022 and 2021, respectively, and for 32.3 % and 27.0 % of consolidated revenues for the six months ended March 31, 2022 and 2021, respectively.

Customers that accounted for more than 10% of consolidated revenues during the three and six months ended March 31, 2022 and 2021 are presented below:

% of Consolidated Revenues

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

2022 2021 2022 2021

Florida Department of Transportation 12.5 % 9.5 % 11.2 % 9.1 %

Revenues from Contracts with Customers

The Company derives all of its revenues from contracts with its customers, predominantly by performing construction services for both public and private infrastructure projects, with an emphasis on highways, roads, bridges, airports and commercial and residential developments.

The Company derives revenues from contracts with its customers, predominantly by performing construction services for both public and private infrastructure projects, with an emphasis on highways, roads, bridges, airports and commercial and residential developments.

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

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

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

Public 61.0 % 59.4 %

% of Consolidated Revenues

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

2022 2021 2022 2021

Private 42.1 % 41.8 % 40.5 % 41.2 %

Public 57.9 % 58.2 % 59.5 % 58.8 %

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.

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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

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

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

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

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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, 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 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.

The Company also has debt securities reflected as restricted investments on its Consolidated Balance Sheets at March 31, 2022 and September 30, 2021.

These investments are adjusted to fair value at each balance sheet date based on quoted prices which are considered Level 1 inputs.

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

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

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Comprehensive Income

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

The Company reports comprehensive income in its 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.

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

For additional information about comprehensive income, see Note 18 - Other Comprehensive Income.

1 unchanged sentence

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.

In December 2019, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("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.

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Note 4 - Business Acquisitions

On March 7, 2022, the Company acquired substantially all of the assets of Southern Asphalt, Inc., an asphalt paving company headquartered in Burgaw, North Carolina.

The transaction provides access to the Wilmington, North Carolina metro area market.

On March 18, 2022, the Company acquired substantially all of the assets of GAC Contractors, Inc., an asphalt paving, grading and sitework company headquartered in Panama City, Florida.

The transaction enhances the Company's operational resources and capabilities in the growing Panama City, Florida market area.

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.

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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.

These acquisitions were accounted for as business combinations in accordance with FASB Accounting Standards Codification Topic 805 Business Combinations ("ASC").

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

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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 was $ 67.1 million, which was paid with cash on hand as of December 31, 2021.

Total consideration for these four acquisitions was $ 104.7 million, of which $ 104.1 million has been paid with cash as of March 31, 2022.

These acquisitions were funded with borrowings under the Company's Revolving Credit Facility.

The total consideration has been provisionally allocated as follows:

$ 1.2 million of cash and cash equivalents, $ 8.9 million of contracts receivable including retainage, net, $ 0.1 million of costs and estimated earnings in excess of billings on uncompleted contracts, $ 2.0 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, $ 1.2 million of accrued expenses and other current liabilities, $ 50.0 million of property, plant and equipment and $ 46.4 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.

Combined Acquisitions During the Three Months and Six Months Ended March 31, 2022

The Consolidated Statements of Comprehensive Income includes $ 15.2 million of revenue and $ 1.0 million of net loss

attributable to the operations of these acquisitions for the three months ended March 31, 2022 and $ 29.8 million of revenue and $ 1.3 million of net loss attributable to the operations of these acquisitions for the six months ended March 31, 2022 from their respective acquisition dates.

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,

For the Three Months Ended March 31,

Pro forma revenues $ 271,322 $ 222,760

Pro forma net income $ ( 8,180 ) $ ( 3,335 )

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.

For the Six Months Ended March 31,

Pro forma revenues $ 583,301 $ 457,765

Pro forma net income $ ( 1,479 ) $ 6,352

Pro forma financial information is presented as if the acquired operations 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 and six months ended March 31, 2022 and 2021.

(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.

Interest expense calculations further assume that no principal payments were made during the period from October 1, 2020 through March 31, 2022, 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 March 31, 2022.

(d) Exclude $ 0.4 million of acquisition-related expenses from the three and six months ended March 31, 2022, 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.

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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.

As of March 31, 2022, 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 December 31, 2021 and September 30, 2021 (in thousands):

December 31, 2021 September 30, 2021

Contracts receivable including retainage, net consisted of the following at March 31, 2022 and September 30, 2021 (in thousands):

March 31, 2022 September 30, 2021

Contracts receivable $ 143,583 $ 132,456

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Note 6 - Contract Assets and Liabilities

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 and estimated earnings compared to billings on uncompleted contracts at March 31, 2022 and September 30, 2021 consisted of the following (in thousands):

March 31, 2022 September 30, 2021

Costs on uncompleted contracts $ 1,239,920 $ 1,058,434

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Net billings in excess of costs and estimated earnings on uncompleted contracts $ ( 22,032 ) $ ( 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, 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 1,386 ( 12,722 ) ( 11,336 )

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.

March 31, 2022 (unaudited) $ 24,409 $ ( 46,441 ) $ ( 22,032 )

At March 31, 2022, the Company had unsatisfied or partially unsatisfied performance obligations under construction project contracts representing approximately $ 985.9 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 $ 577.1 million during the remainder of the fiscal year ending September 30, 2022 and $ 408.8 million thereafter.

Note 7 - Property, Plant and Equipment

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

December 31, 2021 September 30, 2021

Property, plant and equipment at March 31, 2022 and September 30, 2021 consisted of the following (in thousands):

March 31, 2022 September 30, 2021

Construction equipment $ 377,311 $ 333,966

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Total property, plant and equipment, net $ 454,630 $ 404,832

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.

Depreciation, depletion and amortization expense related to property, plant and equipment was $ 17.0 million and $ 12.2 million for the three months ended March 31, 2022 and 2021, respectively, and $ 32.8 million and $ 23.2 million for the six months ended March 31, 2022 and 2021, respectively.

Note 8 - Debt

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

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

December 31, 2021 September 30, 2021

Debt at March 31, 2022 and September 30, 2021 consisted of the following (in thousands):

March 31, 2022 September 30, 2021

Long-term debt:

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

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

Long-term debt, net of current maturities $ 317,303 $ 206,175

Note 9 - Equity

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Conversion of Class B Common Stock to Class A Common Stock

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.

During the six months ended March 31, 2022, 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 March 31, 2022, there were 41,192,039 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.

During the six months ended March 31, 2022, 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 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.

During the six months ended March 31, 2022, the Company awarded a total of 253,659 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”).

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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 (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

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

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

2022 2021 2022 2021

Net income (loss) attributable to common stockholders $ ( 9,418 ) $ ( 4,935 ) $ ( 3,907 ) $ 2,936

Weighted average number of common shares outstanding, basic 51,793,443 51,686,652 51,744,052 51,586,846

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

Net income (loss) per common share attributable to common stockholders, basic $ ( 0.18 ) $ ( 0.10 ) $ ( 0.08 ) $ 0.06

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

For the Three Months Ended December 31,

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

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

2022 2021 2022 2021

Net income (loss) attributable to common stockholders $ ( 9,418 ) $ ( 4,935 ) $ ( 3,907 ) $ 2,936

Weighted average number of basic common shares outstanding, basic 51,793,443 51,686,652 51,744,052 51,586,846

Effect of dilutive securities:

Restricted stock grants 281,970 228,637

Restricted stock grants under 2018 Equity Incentive Plan — — — 86,736

Weighted average number of diluted common shares outstanding 51,793,443 51,686,652 51,744,052 51,673,582

51,977,974 51,717,848

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

Net income (loss) per diluted common share attributable to common stockholders $ ( 0.18 ) $ ( 0.10 ) $ ( 0.08 ) $ 0.06

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 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.

The Company’s effective income tax rate for the three months ended March 31, 2022 and 2021 was 23.5 % and 23.5 %, respectively.

The Company’s effective tax rate for the six months ended March 31, 2022 and 2021 was 21.8 % and 28.4 %, respectively.

The changes in the Company's effective rates are due to differences in state tax rates at its operating subsidiaries.

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 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.

At March 31, 2022, $ 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.

At March 31, 2022, $ 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.

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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”).

• 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”).

• 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 is party to a management services agreement with SunTx, under which the Company pays SunTx $ 0.27 million per fiscal quarter and reimburses certain travel and other out-of-pocket expenses associated with services rendered under the management services agreement.

The following table presents revenues earned and expenses incurred by the Company during the three months ended December 31, 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):

The following table presents revenues earned and expenses incurred by the Company during the three and six months ended March 31, 2022 and 2021, and accounts receivable and payable balances at March 31, 2022 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 December 31, December 31, September 30,

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

2022 2021 2022 2021 2022 2021

(unaudited) (unaudited) (unaudited)

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

Purchaser of Subsidiary $ — $ — $ — $ — $ 518 $ 518

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Subcontracting Services ( 853 ) (1) ( 425 ) (1) ( 3,092 ) (1) ( 2,603 ) (1) ( 226 ) ( 563 )

( 2,178 ) (1)

Construction Services — (2) 119 (2) 3 (2) 119 (2) — —

Island Pond ( 80 ) (2) ( 80 ) (2) ( 160 ) (2) ( 160 ) (2) — —

Vehicles - Purchases — (3) ( 98 ) (3) — (3) ( 408 ) (3) — —

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

SunTx ( 384 ) (2) ( 521 ) (2) ( 759 ) (2) ( 1,138 ) (2) — —

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

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

Note 13 - Equity-Based 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 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 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:

Compensation expense in connection with the Equity Incentive Plan, is reflected as general and administrative expenses in the Company’s Consolidated Statements of Comprehensive Income.

Compensation expense was $ 1.7 million and $ 0.4 million for the three months ended March 31, 2022 and 2021, respectively, and $ 3.2 million and $ 0.9 million for the six months ended March 31, 2022 and 2021, respectively.

At March 31, 2022, there was approximately $ 16.5 million of unrecognized compensation expense related to these awards.

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

Fiscal Year Number of Shares

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

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.

As of March 31, 2022, 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 $ 11.5 million, $ 2.1 million and $ 9.6 million, respectively.

As of March 31, 2022, 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,

For the Three Months Ended March 31,

Operating lease cost $ 637 $ 553

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Total lease expense $ 4,751 $ 3,188

For the Six Months Ended March 31,

Operating lease cost $ 1,234 $ 1,353

Short-term lease cost 8,207 5,125

Total lease expense $ 9,441 $ 6,478

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.

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

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):

As of March 31, 2022, the weighted-average remaining term of the Company’s leases was 7.9 years, and the weighted-average discount rate was 3.29 %.

As of March 31, 2022, the lease liability was equal to the present value of the remaining lease payments, discounted using the incremental borrowing rate on the Company’s secured debt using a single maturity discount rate, as such rate is not materially different from the discount rate applied to each of the leases in the portfolio.

The following table summarizes the Company’s undiscounted lease liabilities outstanding as of March 31, 2022 (unaudited, in thousands):

Fiscal Year Amount

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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.

If the Company designates 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.

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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,

Changes in the 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 and six months ended March 31, 2022 and 2021 and the fair value of these derivatives as of March 31, 2022 and September 30, 2021 (in thousands):

For the Three Months Ended March 31,

Change in Change in

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Total $ ( 67 ) $ 1,994 $ 1,927 $ ( 74 ) $ 1,213 $ 1,139

December 31, 2021 September 30, 2021

For the Six Months Ended March 31,

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 $ 857 $ 778 $ 1,635 $ ( 45 ) $ 1,758 $ 1,713

Interest expense, net ( 909 ) 1,352 443 ( 348 ) 619 271

Total $ ( 52 ) $ 2,130 $ 2,078 $ ( 393 ) $ 2,377 $ 1,984

March 31, 2022 September 30, 2021

Balance Sheet Classification (unaudited)

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Accrued expense and other current liabilities - interest rate swaps ( 16 ) ( 97 )

Other long-term liabilities - commodity swaps ( 65 ) —

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

( 350 ) ( 748 )

Net unrealized gain position $ 12,565 $ 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.

(1) Includes designated cash flow hedge of $ 9,437 and $ 0 as of March 31, 2022 and September 30, 2021, respectively.

(2) Includes designated cash flow hedge of $ 0 and $( 31 ) as of March 31, 2022 and September 30, 2021, respectively.

Note 16 - Fair Value Measurements

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

The following table presents the Company’s liabilities measured at fair value on a recurring basis as of March 31, 2022 and September 30, 2021 under ASC 820, Fair Value Measurements (in thousands):

March 31, 2022 September 30, 2021

Level 2 Level 2

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Interest rate swaps 9,991 —

Commodity swap contracts $ 65 $ —

Interest rate swap contracts 16 845

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 fair value of 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.

Therefore, 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.

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

At 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.

At March 31, 2022, the Company had aggregate letters of credit outstanding in the amount of $ 11.3 million, primarily related to certain insurance 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.

As of March 31, 2022, the Company had unconditional purchase commitments for diesel fuel and natural gas in the normal course of business in the aggregate amount of $ 5.6 million and $ 2.1 million, respectively.

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):

As of March 31, 2022, our purchase commitments annually thereafter are as follows (in thousands):

Fiscal Year Amount

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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):

The Company has commitments in the form of minimum royalties as of March 31, 2022 in the amount of $ 2.6 million, due as follows (in thousands):

Fiscal Year Amount

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Total $ 2,640

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 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.

Royalty expense recorded in cost of revenue was $ 0.5 million and $ 0.3 million for the three months ended March 31, 2022 and 2021, respectively, and $ 0.8 million and $ 0.5 million for the six months ended March 31, 2022 and 2021, respectively.

Note 18 - Other Comprehensive Income

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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

In March 2022, the Captive purchased debt securities, which have been classified as available-for-sale as of March 31, 2022.

These securities are carried at their fair value based on quoted market prices.

Unrealized gains and losses are reported as components of accumulated other comprehensive income (loss), net.

Amounts in accumulated other comprehensive income (AOCI), net of tax, at March 31, 2022 and September 30, 2021, were as follows (in thousands):

AOCI March 31, 2022 (unaudited) September 30, 2021

Interest rate swap contract $ 9,437 $ ( 31 )

Unrealized loss on available-for-sale securities ( 154 ) —

Less tax effect of other comprehensive income (loss) items ( 2,403 ) 8

Total 6,880 ( 23 )

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Net OCI changes —

Balance at December 31, 2020 $ —

Balance at March 31, 2021 $ —

AOCI Interest Rate Hedge

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Net OCI changes 6,903

Balance at December 31, 2021 $ 1,422

Balance at March 31, 2022 $ 6,880

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

For the Three Months Ended December 31,

For the Three Months Ended March 31,

Interest expense $ 304 $ —

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Total reclassifications from AOCI to earnings $ 226 $ —

Note 20 - Subsequent Events

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

For the Six Months Ended March 31,

Interest expense $ 636 $ —

Benefit from income taxes ( 164 ) —

Total reclassifications from AOCI to earnings $ 472 $ —

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