What changed in this filing

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Item 1A. Risk Factors

2022-11-22 compared with 2021-11-29 · 40 added, 66 removed, 382 unchanged (22% of the section changed)

11 unchanged sentences

Demand for infrastructure projects depends on overall economic conditions, the need for new or replacement infrastructure, the priorities placed on various projects funded by governmental entities and federal, state and local government spending levels.

In particular, low tax revenues, credit rating downgrades, budget deficits and financing constraints, including timing and amount of federal funding and competing governmental priorities, could negatively impact the ability of government agencies to fund existing or new public infrastructure projects.

government agencies to fund existing or new public infrastructure projects.

In addition, any instability in the financial and credit markets could negatively impact our customers’ ability to pay us on a timely basis, or at all, for work on projects already in progress, could cause our customers to delay or cancel construction projects in our contract backlog, and could create difficulties for customers to obtain adequate financing to fund new construction projects, including through the issuance of municipal bonds.

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States generally must spend these funds on the specific programs outlined in the federal legislation.

In recent years, the Highway Trust Fund has faced insolvency as outlays have outpaced revenues.

In recent years, annual shortfalls have been addressed primarily by short-term measures.

In recent years, the Highway Trust Fund has faced insolvency as outlays have outpaced revenues, and annual shortfalls have been addressed primarily by short-term measures.

In November 2021, the IIJA was signed into law, which increases federal spending on surface transportation programs and provides additional funding for highways, bridges and airports over a five-year period.

Although the law provides for funding at historically high levels, the timing, nature and scale of the projects for which these funds will be used remains uncertain.

In addition, the Inflation Reduction Act passed in August 2022 provides funding for a variety of infrastructure-related programs.

Although these laws provide for funding at historically high levels, the timing, nature and scale of the projects for which these funds under these programs or otherwise will be used remains uncertain.

As a result, we cannot be assured of the existence, timing or amount of future federal highway funding.

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Any reduction in federal highway funding, particularly in the amounts allocated to states in which we operate, could have a material adverse effect on our results of operations.

While the incoming administration has announced an infrastructure stimulus plan, we cannot predict the impact, if any, that it or other proposed changes in law and regulations may have on our business.

Each state funds its infrastructure spending from specially allocated amounts collected from various state taxes, typically fuel taxes and vehicle fees, as well as from voter-approved bond programs.

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We believe that we will continue to rely on state DOTs for a substantial portion of our revenues for the foreseeable future.

The loss or reduction of our ability to competitively bid for certain projects or successfully contract with a state DOT could have a material adverse effect on our financial condition, results of operation and liquidity.

See Note 2 - Significant Accounting Policies,

Concentration of Risks, to the consolidated financial statements included elsewhere in this report for information relating to concentrations of revenues by type of customer and for a description of our largest customers.

Government contracts generally are subject to a variety of governmental regulations, requirements and statutes, the violation or alleged violation of which could have a material adverse effect on our business.

The loss or reduction of our ability to competitively bid for certain projects or successfully contract with state DOTs could have a material adverse effect on our financial condition, results of operation and liquidity.

See Note 2 - Significant Accounting Policies, Concentration of Risks, to the consolidated financial statements included elsewhere in this report for information relating to concentrations of revenues by type of customer and for a description of our largest customers.

Government contracts generally are subject to a variety of regulations, requirements and statutes, the violation or alleged violation of which could have a material adverse effect on our business.

Our contracts with governmental agencies are generally subject to specific procurement regulations, contract provisions and a variety of socioeconomic requirements relating to their formation, administration, performance and accounting and often include express or implied certifications of compliance.

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Pricing on fixed unit price contracts is based on approved quantities irrespective of our actual costs, and contracts with a fixed total price require that the work be performed for an agreed-upon price irrespective of our actual costs.

We only generate profits on fixed unit price and fixed total price contracts when our revenues exceed our actual costs, which requires us to accurately estimate our costs, control our actual costs and avoid cost overruns.

We generate profits on fixed unit price and fixed total price contracts only when our revenues exceed our actual costs, which requires us to accurately estimate and control our costs and avoid cost overruns.

If our cost estimates are too low or if we do not perform the contract within our cost estimates, then cost overruns may cause us to incur a loss or cause the contract not to be as profitable as we expected.

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• the failure by our suppliers, subcontractors, designers, engineers or customers to perform their obligations;

• fraud, theft or other improper activities by our suppliers, subcontractors, designers, engineers, customers or our own personnel;

• fraud, theft or other improper activities by our suppliers, subcontractors, designers, engineers, customers or personnel;

• mechanical problems with our machinery or equipment;

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Because our industry is capital-intensive and we have significant fixed and semi-fixed costs, our profitability is sensitive to changes in volume.

The property, plants and equipment needed to produce our products and provide our services can be very expensive.

The property, plants and equipment needed to produce our products and provide our services can be expensive.

We must spend a substantial amount of capital to purchase and maintain such assets.

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We also cannot know whether there will be attractive acquisition opportunities at reasonable prices, that financing will be available or that we can successfully integrate acquired businesses into our existing operations.

In addition, our results of operations from these acquisitions could, in the future, result in impairment charges for any of our intangible assets, including goodwill or other long-lived assets, particularly if economic conditions worsen unexpectedly.

In addition, our results of operations from these acquisitions could, in the future, result in impairment

charges for any of our intangible assets, including goodwill or other long-lived assets, particularly if economic conditions worsen unexpectedly.

We may lose business to competitors that underbid us and may be unable to compete favorably in our highly competitive industry.

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In addition, even if we are able to successfully renew or obtain performance or payment bonds, we may be required to post letters of credit in connection with such bonds, which could negatively affect our liquidity and results of operations.

Our business is seasonal and subject to adverse weather conditions, which can adversely impact our business.

Our business is seasonal and subject to adverse weather and climate conditions, which can adversely impact our business.

Our construction operations occur outdoors in an area of the country in which hurricanes, tornadoes and tropical storms are common and snow frequently occurs in certain markets in the winter.

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Although we have invested in the protection of our data and information technology to reduce these risks and periodically test the security of our information systems network, there can be no assurance that our efforts will prevent breakdowns or breaches in our systems that could have a material adverse effect on our financial condition, results of operations and liquidity.

Similarly, our suppliers rely extensively on computer systems to process transactions and manage their businesses and, thus, are also at risk from, and may be impacted by, cybersecurity attacks.

Similarly, our suppliers rely extensively on computer systems to process transactions and manage their businesses and, thus, are also at risk of, and may be impacted by, cybersecurity attacks.

An interruption in the business operations of our suppliers and other third parties with which we do business resulting from a cybersecurity attack could indirectly impact our business operations.

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Labor is a primary component of operating our business.

A number of factors may adversely affect the labor force available to us or increase labor costs from time to time, including high employment levels, federal unemployment subsidies, including unemployment benefits offered in response to the COVID-19 pandemic, and other government regulations.

Although we have not experienced any material disruptions due to labor shortages to date, we have observed an overall tightening and increasingly competitive labor market.

A sustained labor shortage or increased turnover rates within our employee base, whether caused by COVID-19 or as a result of

general macroeconomic factors, could lead to increased costs, such as increased overtime to meet demand and increased wage rates to attract and retain employees, and could negatively affect our ability to complete our construction projects according to the required schedule or otherwise efficiently operate our business.

Although we have not experienced material disruptions due to labor shortages to date, we have observed an overall tightening and increasingly competitive labor market.

A sustained labor shortage or increased turnover rates within our employee base could lead to increased costs, such as increased overtime to meet demand and increased wage rates to attract and retain employees, and could negatively affect our ability to complete our construction projects according to the required schedule or otherwise efficiently operate our business.

If we are unable to hire and retain employees capable of performing at a high level, or if mitigation measures we may take to respond to a decrease in labor availability, such as overtime and third-party outsourcing, have unintended negative effects, our business could be adversely affected.

In addition, we distribute our products and receive raw materials primarily by truck.

Reduced availability of trucking capacity due to shortages of drivers, primarily as a result of the COVID-19 pandemic, has caused an increase in the cost of transportation for us and our suppliers.

An overall labor shortage, lack of skilled labor, increased turnover or labor inflation, caused by COVID-19 or as a result of general macroeconomic factors, could have a material adverse impact on our operations, results of operations, liquidity or cash flows.

Reduced availability of trucking capacity due to shortages of drivers and increased fuel costs has caused an increase in the cost of transportation for us and our suppliers.

An overall labor shortage, lack of skilled labor, increased turnover or labor inflation could have a material adverse impact on our operations, results of operations, liquidity or cash flows.

We depend on third parties for equipment and supplies essential to operate our business.

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We rely on our supply chain for raw materials to manufacture HMA and for equipment, vehicles and construction supplies in order to complete our projects.

A reduction or interruption in supply, including disruptions due to the COVID-19 pandemic, a significant natural disaster, shortages in global freight capacity, significant increases in the price of critical components and raw materials, a failure to appropriately forecast or adjust our requirements based on our business needs, or volatility in demand for our products and services could materially adversely affect our business, operating results, and financial condition and could materially damage customer relationships.

A reduction or interruption in supply, including disruptions due to shortages in global freight capacity, significant increases in the price of critical components and raw materials, a failure to appropriately forecast or adjust our requirements based on our business needs, a significant natural disaster or volatility in demand for our products and services could materially adversely affect our business, operating results, and financial condition and could materially damage customer relationships.

Our vendors and subcontractors also may be unable to meet our demand, significantly increase lead times for deliveries or impose significant price increases that we are unable to offset through alternate sources of supply, price increases to our customers or increased productivity in our operations.

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At September 30, 2022, our contract backlog was $1,410.8 million, compared to $966.2 million at September 30, 2021.

Our contract backlog generally consists of construction projects for which we either have an executed contract or commitment with a client or have submitted the current low bid.

Our contract backlog generally consists of construction projects for which we either have an executed contract or commitment with a client or have submitted the currently lowest bid.

Contract backlog does not include external sales of HMA, aggregates, and liquid asphalt cement.

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A failure to obtain or maintain adequate insurance coverage could adversely affect our results of operations.

We maintain insurance coverage as part of our overall risk management strategy and pursuant to our financing agreements and a majority of our contracts that require us to maintain specific types and amounts of coverage.

We maintain insurance coverage as part of our overall risk management strategy, and a majority of our contracts require us to maintain specific types and amounts of coverage.

Although we have been able to obtain reasonably priced insurance coverage to meet our requirements in the past, there is no assurance that we will be able to do so in the future.

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Losses up to our deductible amounts are accrued based on our estimates of the ultimate liability for claims incurred and an estimate of claims incurred but not reported.

However, liabilities subject to insurance are difficult to estimate due to unknown factors, including the severity of an injury, the determination of our liability in proportion to other parties, the number of unreported incidents and the effectiveness of our safety programs.

However, liabilities subject to insurance are difficult to estimate due to unknown factors, including the severity of an injury, the

determination of our liability in proportion to other parties, the number of unreported incidents and the effectiveness of our safety programs.

If we experience insurance claims or costs above our estimates, we may be required to use working capital to satisfy these claims rather than for maintaining or expanding our operations.

Mandatory COVID-19 vaccination of employees could impact our workforce and have a material adverse effect on our business and results of operations.

On November 5, 2021, OSHA published an emergency temporary standard mandating that all employers with at least 100 employees require all of their employees to be fully vaccinated on or before January 4, 2022 or tested weekly for COVID-19 (the “ETS”).

As a company with more than 100 employees, we are subject to the ETS.

At this time, it is not possible to predict with certainty whether the ETS will remain in effect or be invalidated by the courts, and we cannot predict the exact impact that the ETS will have on us or on our workforce.

If the ETS takes effect, the ETS may result in employee attrition, which could materially adversely affect future revenues and costs and could have a material adverse effect on our business and results of operations.

Our failure to comply with immigration laws could result in significant liabilities, harm our reputation with our customers and disrupt our operations.

Although we take steps to verify the employment eligibility status of all our employees, some of our employees may, without our knowledge, be unauthorized workers.

Although we take steps to verify the employment eligibility status of all of our employees, some of our employees may, without our knowledge, be unauthorized workers.

Unauthorized workers are subject to deportation and may subject us to fines or penalties and, if any of our workers are found to be unauthorized, we could experience adverse publicity that could make it more difficult to hire and retain qualified employees.

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Our substantial indebtedness could adversely affect our financial condition and prevent us from fulfilling our obligations.

Our debt consists primarily of our borrowings under the Credit Agreement, which, as of September 30, 2021, provided for a $200.0 million Term Loan and a $225.0 million Revolving Credit Facility.

Our debt consists primarily of our borrowings under the Credit Agreement, which, as of September 30, 2022, provided for a $250.0 million Term Loan, a $325.0 million Revolving Credit Facility and a $50.0 million Delayed Draw Term Loan.

A significant portion of our cash flow is required to pay interest and principal on our outstanding indebtedness, and we may be unable to generate sufficient cash flow from operations, or have future borrowings available, to enable us to repay our indebtedness or to fund other liquidity needs.

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The Credit Agreement also requires us to maintain a fixed charge coverage ratio and a consolidated leverage ratio and contains certain customary representations and warranties, affirmative covenants and events of default (including, among others, an event of default upon a change of control).

If an event of default occurs, the lenders under the Credit Agreement will be entitled to accelerate amounts due thereunder and take other actions permitted to be taken by a secured creditor.

If an event of default occurs, the lenders under the Credit Agreement will be entitled to accelerate amounts due thereunder and take other actions permitted to be taken by a secured

If our indebtedness is accelerated, we cannot be certain that we will have sufficient funds available to pay the accelerated indebtedness or that we will have the ability to refinance the accelerated indebtedness on terms favorable to us or at all.

The previously announced phase-out of LIBOR, or the replacement of LIBOR with a different reference rate, may adversely affect the interest rate that we pay on our indebtedness.

The annual interest rates applicable to advances made under the Credit Agreement is calculated, at our option, by using either a base rate or LIBOR, in each case plus an applicable margin percentage that corresponds to our consolidated total leverage ratio.

In 2017, the United Kingdom’s Financial Conduct Authority, which regulates LIBOR, announced that it would phase out LIBOR by the end of 2021.

However, the ICE Benchmark Administration, in its capacity as administrator of USD LIBOR, has announced that it intends to extend publication of USD LIBOR (other than one-week and two-month tenors) by 18 months to June 2023.

It is unclear whether new methods of calculating LIBOR will be established such that it continues to exist after 2023, or whether alternative rates or benchmarks will be adopted.

Changes in the method of calculating LIBOR, or the replacement of LIBOR with an alternative rate or benchmark, may adversely affect interest rates, including the rates we pay on borrowings under the Credit Agreement, and result in higher borrowing costs.

The Credit Agreement provides that, upon the occurrence of certain triggering events relating to the end of LIBOR, we and the administrative agent under the Credit Agreement will select a different benchmark rate to replace LIBOR as the reference rate for interest accruing on certain advances.

Changes in, or the inability to agree on, an alternative rate or benchmark may negatively impact the terms of such indebtedness.

We may need to raise additional capital in the future for working capital, capital expenditures and/or acquisitions, and we may not be able to do so on favorable terms or at all, which could impair our ability to operate our business or achieve our growth objectives.

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Any significant interruption in production capability may require us to make significant capital expenditures to remedy problems or damage and cause us to lose revenues due to lost production time.

These force majeure events may affect our operations or those of our customers or suppliers and could impact our revenues, production capability and ability to complete contracts in a timely manner.

Our business could be materially and adversely affected by a widespread outbreak of a contagious disease or other similar adverse public health development, such as COVID-19, or fear of such an event, and the measures that federal, state and local governments, agencies, law enforcement and health authorities implement to address it.

Our business could be adversely impacted by the effects of a widespread outbreak of a contagious disease, including the COVID-19 pandemic or a similar adverse public health development, as well as actions taken by federal, state and local governments, agencies, law enforcement and health authorities to contain the outbreak.

Such an event in our markets could, among other things, result in employee absences or require us to temporarily close our facilities or project sites, which, in turn, could significantly and adversely affect our productivity and our ability to complete projects in accordance with our contractual obligations.

In addition, a disruption in the supply chain for raw materials or equipment, whether as a result of facility closures or otherwise, could increase our labor and materials costs and impair our ability to manufacture HMA.

Moreover, our customers – both public and private – who are adversely impacted could cancel or delay current or prospective projects and could become delinquent in their payments to us for work that we have performed.

Although several of these risks have materialized in varying degrees as a result of the COVID-19 pandemic, none of these risks, individually or in the aggregate, have significantly impacted our operations to date.

Our business could also be negatively impacted over the medium-to-longer term if the disruptions related to the COVID-19 pandemic decrease consumer confidence generally or significantly prolong the current economic downturn, which could lead to a decline in public and private development projects and thereby reduce demand for our services.

An economic slowdown caused by the outbreak of an infectious disease or other similar adverse public health development could cause, and in some cases have caused, the tax revenues received by federal, state and local government agencies to decline and thereby decrease the funding available for public projects.

Such developments could (i) impair our ability to undertake construction projects in a typical manner or at all, generate revenues and cash flows, and/or access the capital or lending markets (or significantly increase the costs of doing so);

(ii) increase the costs or decrease the supply of raw materials or equipment or the availability of subcontractors and other talent, including as a result of infections or quarantining;

and/or (iii) result in the diversion of public funds that otherwise would be available for infrastructure projects to support public health efforts.

The inherent uncertainty surrounding COVID-19, due in part to rapidly changing governmental directives, public health challenges and progress, and market reactions thereto, also makes it challenging for our management to estimate the impact of the COVID-19 pandemic on the future performance of our business.

majeure events may affect our operations or those of our customers or suppliers and could impact our revenues, production capability and ability to complete contracts in a timely manner.

We have incurred, and expect to continue to incur, substantial costs as a result of being a public company, which may significantly affect our financial condition.

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The out-of-pocket costs, the diversion of management’s attention from running the day-to-day operations and operational changes caused by the need to comply with the requirements of Section 404 have been significant, and we expect to continue to incur substantial costs in connection with our compliance efforts.

If we fail to comply with the requirements of Section 404, or if we or our auditors identify and report any material weaknesses, the accuracy and timeliness of the filing of our annual and quarterly reports may be materially adversely affected and could cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price

of our Class A common stock.

In addition, a material weakness in the effectiveness of our internal control over financial reporting could result in an increased chance of fraud and the loss of customers, reduce our ability to obtain financing, subject us to investigations by the SEC or other regulatory authorities and require additional expenditures to comply with these requirements, each of which could have a material adverse effect on our business, results of operations and financial condition.

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As of November 21, 2022, our outstanding Class B common stock represented approximately 73.3% of the total voting power of our outstanding common stock.

The shares of Class B common stock are held primarily by SunTx, its affiliates and certain members of management.

The shares of Class B common stock are beneficially owned primarily by SunTx, its affiliates and certain members of management.

Because of the ten-to-one voting ratio between our Class B common stock and our Class A common stock, the holders of our Class B common stock collectively control a majority of the combined voting power of our common stock and therefore control the outcome of all matters submitted to our stockholders.

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Affiliates of SunTx control us, and their interests may conflict with ours or yours in the future.

As of November 19, 2021, the SunTx funds beneficially owned approximately 1.7% of our outstanding Class A common stock and approximately 82.1% of our outstanding Class B common stock, representing 61.3% of the combined voting power of our common stock.

As of November 21, 2022, the SunTx funds, together with their principals and their principals’ affiliated entities, beneficially owned approximately 2.2% of our outstanding Class A common stock and approximately 79.5% of our outstanding Class B common stock, representing 58.9% of the combined voting power of our common stock.

Each share of our Class B common stock has ten votes per share, and each share of our Class A common stock has one vote per share.

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As a result, the interests of affiliates of SunTx may not in all cases be aligned with your interests.

In addition, SunTx may have an interest in pursuing acquisitions, divestitures and other transactions that, in its judgment, could enhance its investment, even though such transactions might involve risks to you.

For example, SunTx could cause us to make acquisitions that increase our indebtedness or cause us to sell revenue-generating assets.

SunTx is in the business of making investments in companies and may from time to time acquire and hold interests in businesses that compete directly or indirectly with

In addition, SunTx and its affiliates may have an interest in pursuing acquisitions, divestitures and other transactions that, in its judgment, could enhance its investment, even though such transactions might involve risks to you.

For example, SunTx and its affiliates could cause us to make acquisitions that increase our indebtedness or cause us to sell revenue-generating assets.

SunTx is in the business of making investments in companies and may from time to time acquire and hold interests in businesses that compete directly or indirectly with us.

Our amended and restated certificate of incorporation provides that none of SunTx, any of its affiliates or any director who is not employed by us or his or her affiliates will have any duty to refrain from engaging, directly or indirectly, in the same business activities or similar business activities or lines of business in which we operate.

SunTx also may pursue acquisition opportunities that may be complementary to our business, and, as a result, those acquisition opportunities may not be available to us.

SunTx and its affiliates also may pursue acquisition opportunities that may be complementary to our business, and, as a result, those acquisition opportunities may not be available to us.

So long as SunTx and its affiliates continue to beneficially own a sufficient number of shares of our Class B common stock, they will continue to be able to effectively control our decisions, even if the number of shares of outstanding Class B common stock is limited in proportion to the total number of shares of common stock outstanding.

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Our governing documents designate certain courts as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or other employees.

Our amended and restated certificate of incorporation provides that, subject to limited exceptions, state courts within the State of Delaware (or, if no state court located within the State of Delaware has jurisdiction, the federal district court for the District of

Delaware) will be the sole and exclusive forum for any:

(i) derivative action or proceeding brought on our behalf;

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or (iv) action asserting a claim against us that is governed by the internal affairs doctrine, and that if any action specified above is filed in a court other than a court located within the State of Delaware (each is referred to herein as a foreign action), the claiming party will be deemed to have consented to (a) the personal jurisdiction of state and federal courts located within the State of Delaware in connection with any action brought in any such court to enforce the exclusive forum provision described above and (b) having service of process made upon such claiming party by service upon such claiming party’s counsel in the foreign action as agent for such claiming party.

In addition, our amended and restated bylaws provide that, unless the Company consents in writing to the selection of an alternative forum, the federal district courts of the United States are, to the fullest extent permitted by law, the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act.

These provisions may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other employees, which may discourage such lawsuits against us and our directors, officers and employees.

Alternatively, if a court were to find these provisions inapplicable to, or unenforceable in respect of, one or more covered proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect our business and financial condition.

Alternatively, if a court were to

find these provisions inapplicable to, or unenforceable in respect of, one or more covered proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect our business and financial condition.

Because we are a “controlled company” under the listing standards of The Nasdaq Stock Market LLC and the rules of the SEC, our stockholders do not have, and may never have, certain corporate governance protections that are available to stockholders of companies that are not controlled companies.

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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 1A. Risk Factors