What changed in this filing

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Item 1. Business

2022-11-22 compared with 2021-11-29 · 35 added, 37 removed, 180 unchanged (29% of the section changed)

10 unchanged sentences

2022 Fiscal Year Developments

• North Carolina Acquisitions.

We completed seven acquisitions in North Carolina during the fiscal year, resulting in the addition of fourteen HMA plants primarily in central and eastern North Carolina, providing us with access to additional markets and expanding our footprint in the state.

We also acquired a crushed stone and aggregates facility located near Goldston, North Carolina, that will be used to support our HMA production operations.

• Alabama Acquisition.

We acquired an HMA production and paving company and its affiliated aggregates company headquartered in Cullman, Alabama.

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

• Amendment to Credit Agreement.

On June 24, 2021, we entered into 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”).

For more information about the Credit Agreement, see Note 11 - Debt to our consolidated financial statements included elsewhere in this report.

We did not incur significant disruptions from the COVID-19 pandemic during the fiscal year ended September 30, 2021.

However, we continue to closely monitor the impact of the pandemic on all aspects of our business, including its impact on our customers, employees, suppliers and vendors.

Among the primary risks to our business arising from the pandemic are (i) employee absences, which could adversely affect our productivity and our ability to complete projects in accordance with our contractual obligations, and could require us to temporarily close our facilities or project sites, (ii) potential disruptions in our supply chains for raw materials or equipment, whether as a result of facility closures or otherwise, which could increase our labor and materials costs and impair our ability to manufacture HMA or the ability of our subcontractors to complete their required tasks, and (iii) the impact of the COVID-19 pandemic on our customers, which could cause these customers to cancel or delay current or prospective projects or become delinquent in their payments to us for work that we have performed.

These risks have materialized in varying degrees since the beginning of the pandemic, but none of these risks, individually or in the aggregate, have significantly impacted our operations to date.

In addition, we continue to monitor the impact of the COVID-19 pandemic on fuel and sales tax revenues, which in turn drive funding levels for public projects in our markets.

The extent to which our operations may be impacted by the COVID-19 pandemic will depend on future developments, which are highly uncertain, including the duration of the pandemic, the emergence of different COVID-19 variants, the efficacy and adoption rates of vaccines, and actions by government authorities to contain the outbreak or mitigate the impact of the pandemic.

For example, vaccination requirements imposed by our customers or governmental authorities could increase employee turnover, thereby impairing our ability to perform our construction projects.

Due to the continued uncertainties

surrounding the COVID-19 pandemic, we are unable to predict the impact that the COVID-19 pandemic will have on our financial position, operating results and cash flows in future periods.

• Inflationary Trends.

We are subject to the effects of inflation through wage pressures, increases in the cost of raw materials used to produce HMA, and increases in other items, such as fuel, concrete and steel.

During the fiscal year ended September 30, 2021, we began to experience an upward trend in several of these inflation-sensitive items.

We seek to recover increasing costs by charging higher prices for our products or by including the anticipated price increases in our bids.

Due to the relatively short-term duration of our construction contracts, we are generally able to reduce our exposure to price increases on new contracts, but we are limited in our ability to pass through increased costs for projects already in our backlog.

Going forward, continued cost inflation in these areas may require further price adjustments to maintain profit margin, and any price increases may have a negative effect on demand.

• Inflationary and Supply Chain Trends.

During the fiscal year ended September 30, 2022, we continued to experience an upward trend in several inflation-sensitive inputs necessary for us to provide our products and services, including upward pressure on wages and increases in the cost of raw materials used to produce HMA and other items that are critical to our business, including fuel, concrete and steel.

In addition, we experienced some disruptions from various participants in our supply chain, including subcontractors, materials suppliers and equipment manufacturers, who provide the raw materials, equipment, vehicles, construction supplies and other services we require in order to manufacture HMA and perform our construction projects.

To date, we have been able to mitigate some of the effects of inflation, supply chain disruptions and labor constraints on our business by increasing prices for our products and including the anticipated cost increases in the construction projects we bid.

However, we are limited in our ability to pass through increased costs for projects already in our backlog and, under those circumstances, may be unable to recoup losses or diminished profit margins by passing these costs through to our customers.

• South Carolina Acquisitions.

We acquired King Asphalt, Inc., an HMA production and paving company headquartered in Liberty, South Carolina.

This transaction established our first platform company in South Carolina and added three HMA plants in the Greenville, South Carolina metro area.

We also acquired an asphalt paving, grading and site work company headquartered in Conway, South Carolina.

This transaction added two HMA plants and provides access to Horry County and the larger Myrtle Beach metro area.

• Florida Acquisitions.

We acquired a grading and site work company headquartered in Pensacola, Florida.

This transaction enhanced our vertical integration of construction services and supplemented our capabilities in the greater Pensacola, Florida market area.

We also acquired an asphalt paving, grading and site work company headquartered in Panama City, Florida.

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

• North Carolina Acquisition.

We acquired an asphalt paving company headquartered in Burgaw, North Carolina.

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

• Credit Agreement.

On June 30, 2022, we entered into the Credit Agreement.

The Credit Agreement provides for (i) a Term Loan in an initial aggregate principal amount of $250.0 million, the full amount of which was drawn at closing, (ii) a Revolving Credit Facility in an initial aggregate principal amount of $325.0 million, and (iii) a Delayed Draw Term Loan facility in an initial aggregate principal amount of $50.0 million.

Among other things, the proceeds of the Term Loan were used to refinance our indebtedness under our prior credit facility.

For further discussion regarding the Credit Agreement, see Note 11 - Debt to our consolidated financial statements included elsewhere in this report.

We operate in the large and growing highway and road construction industry and specifically within the asphalt paving materials and services segment.

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In November 2021, the federal Infrastructure Investment and Jobs Act (the “IIJA”) was signed into law.

The IIJA provides for $548 billion in new infrastructure spending over the next five years through a reauthorization of traditional surface transportation programs and additional funding for highways, bridges and airports, among other things.

The IIJA provides for $548 billion in new infrastructure spending over five years through a reauthorization of traditional surface transportation programs and additional funding for highways, bridges and airports, among other things.

In addition, certain states within our markets have in recent years approved legislation that supports funding for construction of local road, bridge and transit projects.

8 unchanged sentences

Our largest customers are state DOTs.

However, no DOT accounted for more than 10% of our revenues for the fiscal year ended September 30, 2021, and projects performed for all DOTs accounted for 33.7% of our revenues.

F or the fiscal year ended September 30, 2022, the Alabama DOT and North Carolina DOT accounted for 10.0% and 11.2% of our revenues, respectively.

Other than the Alabama DOT and North Carolina DOT, no other customer accounted for more than 10% of our revenues for the fiscal year ended September 30, 2022, and projects performed for all DOTs accounted for 36.8% of our revenues.

Our 25 largest projects acco unted for 16.9% of our revenues for the fiscal year ended September 30 , 2022.

15 unchanged sentences

We consider several factors that can create variability in contract performance and our financial results compared to our bid assumptions and methodologies on a contract.

As a result, after determining the potential contracts that are available, we decide which contracts to pursue based on a non-exclusive list of factors, which include relevant skills required by the contract, the contract size and duration, availability of our personnel and equipment, size and makeup of our current contract backlog, our competitive advantages and disadvantages, our prior experience, the contracting agency or customer, the source of contract

funding, the geographic location, the likely competition, the construction risks, the gross margin opportunities, the penalties or incentives and the type of contract.

To ensure the completeness and accuracy of our original bid analysis, the bid preparation for potential projects typically involves three phases.

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In addition, construction materials production and shipment levels follow activity in the construction industry, which typically occurs in the spring, summer and fall.

Warmer and drier

weather during our third and fourth fiscal quarters typically result in higher activity and revenues during those quarters.

Warmer and drier weather during our third and fourth fiscal quarters typically result in higher activity and revenues during those quarters.

Our first and second fiscal quarters typically have lower levels of activity due to adverse weather conditions.

7 unchanged sentences

We are able to internally supply RAP, a byproduct of asphalt resurfacing projects, to all of our HMA plants, and virgin aggregates in some of our market areas.

The majority of our HMA plants sit in or near suppliers’ aggregates facilities, thereby reducing the hauling cost of material to our plant.

The majority of our HMA plants sit in or near suppliers’ aggregates facilities, thereby reducing the hauling cost of

material to our plant.

The price and availability of raw materials may vary from year to year due to market conditions and production capacities.

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In addition, we may experience delays in obtaining, or be unable to obtain, required permits, which may delay or interrupt our operations and limit our growth and revenue.

Certain environmental laws impose strict liability (i.e., no showing of “fault” is required) as well as joint and several liability for costs required to remediate and restore sites where hazardous substances, hydrocarbons or solid wastes have been stored or released.

We may be required to remediate contaminated properties currently or formerly owned or operated by us, regardless of whether such contamination resulted from the conduct of others or from the consequences of our own actions that complied with applicable laws at the time those actions were taken.

We may be required to remediate contaminated properties currently or formerly owned or operated by us or at which we have disposed of materials, regardless of whether such contamination resulted from the conduct of others or from the consequences of our own actions that complied with applicable laws at the time those actions were taken.

In connection with certain acquisitions, we could assume, or be required to provide indemnification against, environmental liabilities that could expose us to material losses.

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We have incurred, and may in the future incur, significant capital and operating expenditures to comply with such laws and regulations.

To the extent that laws are enacted or other governmental action is taken that restricts our operations or imposes more

stringent and costly operating, waste handling, disposal and cleanup requirements, our business, prospects, financial condition or results of operations could be materially adversely affected.

To the extent that laws are enacted or other governmental action is taken that restricts our operations or imposes more stringent and costly operating, waste handling, disposal and cleanup requirements, our business, prospects, financial condition or results of operations could be materially adversely affected.

We regularly monitor and review our operations, procedures, and policies for compliance with our operating permits and related laws and regulations.

3 unchanged sentences

We have incurred costs in connection with the investigation and remediation of hazardous substances and petroleum products identified at several facilities, and investigation and remediation activities are ongoing at others.

We may also become subject to similar liabilities in connection with prior and future acquisitions.

We may also become subject to

similar liabilities in connection with prior and future acquisitions.

We do not believe that liabilities associated with known or potential contamination at any of our facilities will have a material adverse effect on our operations or financial condition.

33 unchanged sentences

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

What changed 10-K

Item 1. Business