What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2022-11-22 compared with 2021-11-29 · 332 added, 225 removed, 1032 unchanged (35% of the section changed)

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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Report s of Independent Registered Public Accounting Firm

Report s of Independent Registered Public Accounting Firm (PCAOB ID:

Consolidated Balance Sheets at September 30, 2022 and 2021

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

Consolidated Statements of Comprehensive Income for the fiscal years ended September 30, 2022, 2021, and 2020

Consolidated Statements of Stockholders’ Equity for the fiscal years ended September 30, 2022, 2021, and 2020

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

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

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

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

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

Critical Audit Matters

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

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

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

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee of the board of directors and that:

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

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

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

Critical Audit Matter Description

As described in Note 6, the Company has recognized $1,666,969,000 of costs and estimated earnings to date on uncompleted contracts at September 30, 2022.

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• Compared the costs incurred during the month immediately subsequent to the fiscal year-end to costs and estimated earnings to date on uncompleted contracts at September 30, 2022, and on a sample basis, inquired with individuals responsible for oversight and performance of the contracts in order to obtain corroborating evidence regarding estimated earnings on uncompleted contracts.

Fair Value Estimation of Mineral Reserves Acquired in Business Combinations

Critical Audit Matter Description

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

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

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

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

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

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

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

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

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

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

/s/ RSM US LLP

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Opinion on the Internal Control Over Financial Reporting

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

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

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

We have audited Construction Partners, Inc., and its subsidiaries' (the Company) internal control over financial reporting as of September 30, 2022, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013.

In our opinion, the Company has maintained, in all material respects, effective internal control over financial reporting as of September 30, 2022, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of September 30, 2022 and 2021, the related consolidated statements of comprehensive income, stockholders' equity and cash flows for each of the three years in the period ended September 30, 2022, and the related notes to the consolidated financial statements and our report dated November 22, 2022 expressed an unqualified opinion.

As described in Management's Report on Internal Control Over Financial Reporting, management has excluded King Asphalt, Inc.

and Southern Asphalt, Inc.

from its assessment of internal control over financial reporting as of September 30, 2022, because they were acquired by the Company on October 1, 2021 and August 1, 2022, respectively.

We have also excluded King Asphalt, Inc.

and Southern Asphalt, Inc.

from our audit of internal control over financial reporting.

King Asphalt, Inc.

and Southern Asphalt, Inc.

are wholly owned subsidiaries whose total assets (excluding goodwill which was included within the scope of management’s assessment), revenues and net income represent approximately 7%, 6% and 3%, respectively, of the related consolidated financial statement amounts as of and for the year ended September 30, 2022.

Basis for Opinion

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Cash and cash equivalents $ 35,531 $ 57,251

Restricted cash 28 —

Contracts receivable including retainage, net 265,207 158,170

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Investment in joint venture 87 108

Restricted investments 6,866 —

Other assets 30,541 5,534

Deferred income taxes, net — 386

Total assets $ 1,095,521 $ 806,620

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Class A common stock, par value $ 0.001 ;

400,000,000 shares authorized, 36,600,639 shares issued and outstanding at September 30, 2021, and 33,875,884 shares issued and outstanding at September 30, 2020

400,000,000 shares authorized, 41,195,730 shares issued and 41,193,024 shares outstanding at September 30, 2022, and 36,600,639 shares issued and outstanding at September 30, 2021

Class B common stock, par value $ 0.001 ;

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Additional paid-in capital 256,571 248,571

Treasury stock, at cost, 2,706 shares of Class A common stock at September 30, 2022, and no shares at September 30, 2021, par value $ 0.001

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

( 15,603 ) ( 15,603 )

Accumulated other comprehensive loss, net ( 23 ) —

Accumulated other comprehensive income (loss), net 17,620 ( 23 )

Retained earnings 197,274 175,898

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Provision for income taxes 6,915 8,349 12,760

Earnings from investment in joint venture 10 603 1,337

Earnings (loss) from investment in joint venture ( 21 ) 10 603

Net income $ 21,376 $ 20,177 $ 40,297

Other comprehensive (loss), net of tax

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

Other comprehensive (loss) ( 23 ) — —

Other comprehensive income (loss), net of tax

Unrealized gain (loss) on interest rate swap contract, net 18,091 ( 23 ) —

Unrealized (loss) on restricted investments, net ( 448 ) — —

Other comprehensive income (loss) 17,643 ( 23 ) —

Comprehensive income $ 39,019 $ 20,154 $ 40,297

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Conversion of Class B common stock to Class A common stock 1,278,148 1 ( 1,278,148 ) ( 1 ) — — — — —

Issuance of stock grant awards 292,534 — — — — — — — —

Stock option exercise — — 74,592 — 3 — — — 3

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

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

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

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

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

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

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

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

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

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Equity-based compensation expense — — — — 8,000 — — — 8,000

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

Other comprehensive (loss) — — — — — — 17,643 — 17,643

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Equity-based compensation expense 8,000 3,549 1,570

Earnings from investment in joint venture ( 10 ) ( 603 ) ( 1,337 )

Loss (earnings) from investment in joint venture 21 ( 10 ) ( 603 )

Distribution of earnings from investment in joint venture — 100 540

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Purchases of property, plant and equipment ( 68,851 ) ( 56,332 ) ( 52,574 )

Acquisition of liquid asphalt terminal assets — — ( 10,848 )

Proceeds from sale of equipment 7,525 3,654 3,041

Business acquisitions, net of cash acquired ( 128,568 ) ( 210,734 ) ( 30,191 )

Purchase of restricted investments ( 7,432 ) — —

Return of investment in joint venture — — 361

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Principal payments of long-term debt ( 8,125 ) ( 95,350 ) ( 30,412 )

Payment of treasury stock purchase obligation — — ( 569 )

Proceeds from sale of stock — — 3

Net cash provided by (used in) financing activities 123,847 41,887 ( 13,567 )

Net change in cash and cash equivalents ( 91,065 ) 67,697 ( 18,518 )

Cash and cash equivalents:

Purchase of treasury stock ( 39 ) — —

Net cash provided by financing activities 159,136 123,847 41,887

Net change in cash, cash equivalents and restricted cash ( 21,692 ) ( 91,065 ) 67,697

Cash, cash equivalents and restricted cash:

Beginning of year 57,251 148,316 80,619

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

On October 1, 2021, Construction Partners Risk Management, Inc.

(the "Captive"), a captive insurance company and wholly-owned subsidiary of the Company, commenced operations.

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

Management’s Estimates

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

Estimates are used in accounting for items such as recognition of revenues and cost of revenues, 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, investments, 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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The Company has not experienced any losses in such accounts and regularly monitors its credit risk.

Restricted Cash

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

The Company had restricted cash of $ 28,261 and $ 0 at September 30, 2022 and 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 and its 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.

Purchases and sales of debt securities are recorded on the trade date.

Interest income on debt securities is recorded when earned using an "effective yield method." 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 $ 6.9 million and $ 0.0 million at September 30, 2022 and 2021, respectively.

The Company evaluates its available-for-sale debt securities quarterly to determine if there has been a decline in the fair value below the amortized cost due to credit losses or other factors.

This evaluation process entails judgement by the Company, and considers factors including the issuer's financial condition and near-term prospects, future economic conditions, interest rate changes and changes in the rating of the security.

When the Company has determined that it has an intent to sell, or it is more likely than not that the Company will be required to sell a security before it recovers its amortized cost basis above fair value, the individual security is written down to fair value, with a corresponding charge to Other income within the Consolidated Statements of Comprehensive Income.

For available-for-sale debt securities that do not meet the intent impairment criteria but the Company has determined that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security.

If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss allowance is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost basis.

For the fiscal years ended September 30, 2022 and 2021, the Company had $ 0 in intent impairments and credit losses.

Contracts Receivable Including Retainage, Net

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

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

It is common in the Company’s industry for a small portion of either progress billings or the contract price, typically 10%, to be withheld by the customer until the Company completes a project to the satisfaction of the customer in accordance with the applicable contract terms.

Such amounts, defined as retainage, represent a contract asset and are included on the Consolidated Balance Sheets as “Contracts receivable including retainage, net.” Based on the Company’s experience with similar contracts in recent years, billings for such retainage balances are generally collected within one year of the completion of the project.

Such amounts, defined as retainage, are included on the Consolidated Balance Sheets as “Contracts receivable including retainage, net.” Based on the Company’s experience with similar contracts in recent years, billings for such retainage balances are generally collected within one year of the completion of the project.

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

Management provides for uncollectible accounts through a charge to earnings and a credit to the allowance for doubtful accounts based on its assessment of the current status of individual accounts, type of service performed, current economic conditions, historical losses

and other information available to management.

Balances that are still outstanding after management has used reasonable collection efforts are written off through a charge to the allowance for doubtful accounts and an adjustment to the contract receivable.

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

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

Billings do not necessarily correlate with revenues recognized under the cost-to-cost input method.

The Company records contract assets and contract liabilities to account for these differences in timing.

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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.

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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Projects performed for various departments of transportation accounted for 36.8 %, 33.7 % and 32.5 % of consolidated revenues for the fiscal years ended September 30, 2022, 2021 and 2020, respectively.

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

Customers that accounted for more than 10% of consolidated revenues during any of the fiscal years ended September 30, 2022, 2021 and 2020 are presented below:

% of Consolidated Revenues for the Fiscal

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

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

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

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

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

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The Company endeavors to utilize the best available information in measuring fair value.

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

The Company’s financial instruments include cash and cash equivalents, restricted cash, contracts receivable including retainage, accounts payable and accrued expenses reflected as current assets and current liabilities on its Consolidated Balance Sheets at September 30, 2022 and 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 11 - Debt.

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

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

These investments are adjusted to fair value at each balance sheet date and are considered Level 2 inputs.

The Company also has Term Loans and a Revolving Credit Facility, as described in Note 11 - Debt.

The carrying value of amounts outstanding under these credit facilities is reflected as long-term debt, net of current maturities and debt issuance costs and current maturities of long-term debt on the Company’s Consolidated Balance Sheets at September 30, 2022 and 2021.

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

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

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

inherently uncertain.

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

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

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

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

The Company performed a quantitative assessment of goodwill using the market capitalization calculation for fiscal years 2022 and 2021 and determined that the fair value of its reporting unit exceeded its carrying value, and thus concluded that the carrying value of goodwill was not impaired as of our annual goodwill and intangible assets impairment test date, which is July 1.

Accordingly, no further analysis was required or performed.

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

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

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

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

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

Accordingly, no further analysis was required or performed.

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The Company carries insurance policies to cover various risks, primarily including general liability, automobile liability and workers’ compensation, under which it is liable to reimburse the insurance company for a portion of each claim paid.

The amount for which the Company is liable for general liability, automobile liability and workers’ compensation claims ranges from $ 100,000 to $ 500,000 per occurrence.

Management accrues insurance costs for probable losses, both reported and unreported, that are reasonably estimable using actuarial methods based on historic trends modified, if necessary, by recent events.

Effective October 1, 2021, the Captive retains the first $ 1,000,000 per claim liability for each claim paid.

Also effective October 1, 2021, the Company became a member of CIRCA, Limited, a group captive insurance company, that retains the next $ 550,000 per claim liability for each claim paid.

The Company utilizes various primary and excess insurance companies to cover the liability for claims in excess of the retained amounts.

Changes in loss assumptions caused by changes in actual experience would affect the assessment of the ultimate liability and could have an effect on the Company’s operating results and financial position up to $ 1,000,000 per occurrence for general liability, automobile liability and workers’ compensation claims.

Prior to October 1, 2021, the amount for which the Company was liable for general liability, automobile liability and workers’ compensation claims ranged from $ 100,000 to $ 500,000 per occurrence.

The Company provides employee medical insurance under policies that are both fixed-premium, fully-insured policies and self-insured policies that are administered by the insurance company.

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This letter of credit serves as a guarantee by the banking institution to pay the Company’s insurance provider the incurred claim costs attributable to general liability, workers’ compensation and automobile liability claims, up to the amount stated in the standby letter of credit, in the event that these claims are not paid by the Company (see Note 18 - Commitments and Contingencies).

For some contracts, the Company is required to furnish a warranty that is usually one year in length.

Because of the nature of these contracts, including contract owner inspections of the work both during construction and prior to acceptance, the Company has not experienced material warranty costs for these short-term warranties and, therefore, has not established an accrual of these costs.

Certain contracts carry longer warranty periods, for which the Company has accrued an estimate of warranty costs.

The warranty liability is estimated based on the Company's experience with the specific type of construction work and was not material as of September 30, 2022 and 2021.

Earnings per Share

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

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

Capitalized pre-production stripping costs are depleted in accordance with the units-of-production method as aggregates are extracted, once the mine is no longer in the development stage.

Pre-production stripping costs included in property, plant and equipment were $ 3.9 million and $ 2.7 million, respectively, for the fiscal years ended September 30, 2022 and 2021.

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

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

Leases are recognized in accordance with ASC Topic 842, Leases (“Topic 842”).

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

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

Within the provisions of certain leases, there are escalations in payments over the base lease term, which have been reflected in lease expense on a straight-line basis for operating leases over the expected lease term.

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

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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 available-for-sale restricted investments.

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

Segment Reporting and Reporting Units

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

As of September 30, 2022, the Company operated in Alabama, Florida, Georgia, North Carolina and South Carolina through its wholly owned subsidiaries located in five southeastern states.

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

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

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

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

Note 3 - Accounting Standards

Recently Adopted Accounting Pronouncements

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

Under the new guidance, an entity recognizes as an allowance its estimate of expected credit losses, which the FASB believes will result in more timely recognition of such losses.

The amendments pursuant to Topic 326 were effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years.

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

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

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

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

Recently Issued Accounting Pronouncements Not Yet Adopted

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

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

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

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

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

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

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

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

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

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.

The Company expects to adopt

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

The Company adopted this guidance effective October 1, 2021 as required and noted no material impact to the Company's consolidated financial statements.

In October 2021, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2021-08, "Business Combinations (Topic 805) - Accounting for Contract Assets and Contract Liabilities from Contracts with Customers," which requires entities to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with ASC Topic 606, Revenue from Contracts with Customers.

The new standard is effective on a prospective basis for fiscal years beginning after December 15, 2022, with early adoption permitted.

The Company adopted this guidance for the fiscal year ended September 30, 2022 and applied the guidance to business acquisitions that had contract assets and contract liabilities.

Note 4 - Business Acquisitions

North Carolina Acquisitions - Final

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

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

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

Acquisitions - Final

During the fiscal year ended September 30, 2022, the Company and its subsidiaries made the following business acquisitions:

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

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

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

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

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

On March 18, 2022, a subsidiary of 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 enhanced the Company's operational resources and capabilities in the Panama City, Florida market area.

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

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As of September 30, 2022, the Company has finalized its purchase price allocation for these acquisitions.

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

Total consideration transferred for these three acquisitions was $ 92.4 million as of September 30, 2022.

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

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

The amount of the purchase price exceeding the net fair value of identifiable assets acquired and liabilities assumed was recorded as goodwill in the aggregate amount of $ 37.6 million for these three acquisitions, which is deductible for income tax purposes.

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

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

The results of operations attributable to these acquisitions are included in the Company’s Consolidated Statements of Comprehensive Income for the fiscal year ended September 30, 2022, from the date of acquisition forward.

The Company recorded certain costs to effect the acquisition as they were incurred, which are reflected in general and administrative expenses on the Company’s Consolidated Statements of Comprehensive Income in the amount of $ 0.4 million for the fiscal year ended September 30, 2022.

North Carolina Acquisition - Provisional

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

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

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

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

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

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

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

As of September 30, 2022, the purchase price allocation was provisional pending certain information necessary to finalize estimates of liabilities assumed.

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

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

The amount of the purchase price exceeding the net fair value of identifiable assets acquired and liabilities assumed was recorded as provisional goodwill in the amount of approximately $ 7.4 million, of which $ 6.6 million is deductible for income tax purposes.

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

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

The results of operations since the March 7, 2022 acquisition date attributable to this acquisition are included in the Company’s Consolidated Statements of Comprehensive Income for the fiscal year ended September 30, 2022.

The Company recorded certain costs to effect the acquisition as they were incurred, which are reflected in general and administrative expenses on the Company’s Consolidated Statements of Comprehensive Income in the amount of $ 0.1 million for the fiscal year ended September 30, 2022.

Alabama Acquisition - Provisional

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

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

South Carolina Acquisition - Provisional

On August 1, 2022, a subsidiary of the Company acquired substantially all of the assets of Southern Asphalt, Inc., an asphalt paving, grading and sitework company headquartered in Conway, South Carolina.

The transaction provides access to Horry County and the larger Myrtle Beach metro area market.

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

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

As of September 30, 2022, the purchase price allocation has not yet been finalized due to the recent timing of this acquisition, as certain information is pending to finalize estimates of fair value of certain assets acquired and liabilities assumed.

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

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

The amount of the purchase price exceeding the net fair value of identifiable assets acquired and liabilities assumed was recorded as provisional goodwill in the amount of approximately $ 0.3 million, of which $ 0.0 million is deductible for income tax purposes.

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

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

The results of operations since the August 1, 2022 acquisition date attributable to this acquisition are included in the Company’s Consolidated Statements of Comprehensive Income for the fiscal year ended September 30, 2022.

The Company recorded certain costs to effect the acquisition as they were incurred, which are reflected in general and administrative expenses on the Company’s Consolidated Statements of Comprehensive Income in the amount of $ 0.3 million for the fiscal year ended September 30, 2022.

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The following table summarizes the consideration for the aforementioned acquisitions and the amounts of identified assets acquired and liabilities assumed as of September 30, 2022 (in thousands):

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

Accounts receivable $ 110 $ — $ — $ 110

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

Cash and cash equivalents $ 1,168 $ — $ — $ 1,168

Contracts receivable including retainage 7,162 1,854 — 9,016

Cost and estimated earnings in excess of billings on uncompleted contracts 125 — — 125

Inventories 1,928 64 988 2,980

Prepaid expenses and other current assets 213 — — 213

Property, plant and equipment 45,776 3,879 30,636 80,291

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

Deferred tax assets 2,237 234 — 2,471

Intangible assets 9,000 — — 9,000

Total assets 67,609 6,031 31,624 105,264

Accounts payable 2,759 — — 2,759

Billings in excess of costs and estimated earnings on uncompleted contracts 2,697 426 — 3,123

Accrued expenses and other current liabilities 2,526 594 2,980 6,100

Unfavorable contract liabilities 4,900 — 3,000 7,900

Deferred tax liabilities — — 282 282

Total liabilities 12,882 1,020 6,262 20,164

Goodwill 37,647 7,369 284 45,300

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

Total cash consideration transferred 92,374 11,716 25,646 129,736

Total consideration payable — 664 — 664

Total purchase price $ 92,374 $ 12,380 $ 25,646 $ 130,400

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

The Consolidated Statements of Comprehensive Income for the fiscal year ended September 30, 2022 includes $ 120.8 million of revenue and $ 0.9 million of net income attributable to the operations of the businesses acquired during the 2022 fiscal year from their respective acquisition dates through September 30, 2022.

The following presents pro forma revenues and net income as though the acquisitions had occurred on October 1, 2019 (unaudited, in thousands):

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Combined Acquisitions During the Fiscal Year Ended September 30, 2021

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

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

North Carolina Acquisitions

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

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

Total consideration transferred for these six acquisitions was $ 98.7 million.

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

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

Total consideration transferred for this acquisition was $ 31.4 million.

The amount of the purchase price exceeding the net fair value of identifiable assets acquired and liabilities assumed was recorded as goodwill in the aggregate amount of $ 2.4 million for this acquisition.

The prior year provisional accounting for this acquisition was finalized as of September 30, 2022.

Alabama Acquisition

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

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

Total consideration transferred for this acquisition was $ 82.1 million.

The amount of the purchase price exceeding the net fair value of identifiable assets acquired and liabilities assumed was recorded as goodwill in the aggregate amount of $ 2.1 million for this acquisition.

The prior year provisional accounting for this acquisition was finalized as of September 30, 2022.

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

North Carolina Acquisitions Alabama Acquisition Total as of September 30, 2021 Finalized as of September 30, 2022

Accounts receivable $ 110 $ — $ 110 $ 110

Inventories 4,819 6,480 11,299 11,209

Property, plant and equipment 70,613 35,020 105,633 105,847

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

Intangible assets — 75 75 3,700

Total assets 94,142 79,693 173,835 177,584

Total liabilities — ( 718 ) ( 718 ) ( 3,210 )

Goodwill 35,917 3,157 39,074 37,817

Total purchase price $ 130,059 $ 82,132 $ 212,191 $ 212,191

Combined Acquisitions During the Fiscal Year Ended September 30, 2020

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

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

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

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

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

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Balance at beginning of period $ 1,926 $ 1,440

Charged to bad debt expense 784 705

Charged (credited) to bad debt expense ( 947 ) 784

Write-off of contracts receivable including retainage ( 367 ) ( 298 )

Balance at end of period $ 612 $ 1,926

Retainage receivables have been billed, but are not due, until contract completion and acceptance by the customer.

Retainage receivables have been billed and the Company has an unconditional right to payment, but are not due until satisfactory contract completion and acceptance by the customer.

Note 6 - Contract Assets and Liabilities

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September 30,

Interest rate swap contract $ 24,719 $ —

Notes receivable 1,121 1,367

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Additions 45,300

Measurement period adjustments $ ( 1,257 )

Balance at September 30, 2022 $ 129,465

The additions in goodwill as of September 30, 2022 compared to September 30, 2021 were attributable to $ 45.3 million for various Business Acquisitions (see Note 4 - Business Acquisitions) completed during the fiscal year ended September 30, 2022 and a reduction of $ 1.3 million for measurement period adjustments that were finalized for acquisitions completed during the fiscal year ended September 30, 2021.

A summary of other intangible assets at September 30, 2022 and 2021 is as follows (in thousands):

September 30,

Life Gross Accumulated

Weighted Average Life Gross Value Accumulated

Amortization Net Book

Value Gross Accumulated

Value Gross Value Accumulated

Amortization Net Book

Indefinite-lived:

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

Trade name license Indefinite $ 5,300 N/A $ 5,300 $ 2,000 N/A $ 2,000

Finite-lived:

Customer relationship 13 years 11,045 ( 1,304 ) 9,741 1,645 ( 640 ) 1,005

1,645 ( 640 ) 1,005 1,645 ( 435 ) 1,210

Non-compete agreements 7 years 1,220 ( 285 ) 935 1,295 ( 137 ) 1,158

1,295 ( 137 ) 1,158 20 ( 6 ) 14

Total intangible assets $ 17,565 $ ( 1,589 ) $ 15,976 $ 4,940 $ ( 777 ) $ 4,163

The change in gross value as of September 30, 2022 compared to September 30, 2021 is attributable to $ 9.0 million for various Business Acquisitions (see Note 4 - Business Acquisitions) completed during the fiscal year ended September 30, 2022 and $ 3.7 million for provisional accounting adjustments that were finalized for acquisitions completed during the fiscal year ended September 30, 2021.

Total amortization expense related to finite-lived intangible assets was $ 0.8 million, $ 0.3 million and $ 0.2 million for the fiscal years ended September 30, 2022, 2021 and 2020, respectively.

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Accrued insurance costs 3,081 3,444

Unfavorable contract liabilities 4,824 —

Other current liabilities 7,599 3,713

Total accrued expenses and other current liabilities $ 28,484 $ 26,459

Unfavorable contract liabilities represent liabilities acquired as part of the Company's business acquisitions during the fiscal year ended September 30, 2022, as described in Note 4 - Business Acquisitions.

Total amortization expense related to the acquired unfavorable contract liabilities was $ 4.1 million, $ 0.0 million and $ 0.0 million for the fiscal years ended September 30, 2022, 2021 and 2020, respectively.

Other Long-Term Liabilities

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Current maturities of long-term debt ( 12,500 ) ( 10,000 )

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

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

Long-term debt, net of current maturities and debt issuance costs $ 363,066 $ 206,175

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

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

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

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

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

The Term Loan, inclusive of any incremental borrowings made in the form of a term loan, will amortize in quarterly installments commencing on September 30, 2021 in an amount (subject, in each case, to adjustments for prior mandatory and voluntary prepayments of principal) equal to:

(a) 1.25 % of the original principal amount of the Term Loan on September 30, 2021 and on each of the following eleven quarter-end payment dates, and (b) 1.875 % of the original principal amount of the Term Loan on each of the next seven quarter-end payment dates.

The annual interest rates applicable to advances will be calculated, at the Company’s option, by using either a base rate or LIBOR, in each case plus an applicable margin percentage that corresponds to the Company’s consolidated net leverage ratio.

Upon the occurrence of certain triggering events relating to the end of the LIBOR reference rate, a different benchmark rate will be selected to replace LIBOR as the reference rate for interest accruing on certain advances.

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

On June 30, 2022, the Company and each of its subsidiaries entered into a Third Amended and Restated Credit Agreement with PNC Bank, National Association, as administrative agent and lender, PNC Capital Markets LLC, as joint lead arranger and sole bookrunner, 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 (i) a term loan facility in an initial aggregate principal amount of $ 250.0 million (the “Term Loan”) the full amount of which was drawn at closing, (ii) a revolving credit facility in an initial aggregate principal amount of $ 325.0 million, (the “Revolving Credit Facility”), and (iii) a delayed draw term loan facility in an initial aggregate principal amount of $ 50.0 million (the "Delayed Draw Term Loan").

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

All outstanding advances under the Term Loan and Revolving Credit Facility are due and payable in full on June 30, 2027 (the “Maturity Date”).

The Term Loan (commencing on September 30, 2022) and the Delayed Draw Term Loan (commencing with the earliest of (i) December 31, 2023, or (ii) the last day of the fiscal quarter in which the commitments under the Delayed Draw Term Loan are fully drawn or terminated, as applicable) will amortize in quarterly installments in an amount (subject, in each case, to adjustments for prior mandatory and voluntary prepayments of principal) equal to:

(a) 1.25 % of the original principal amount of the Term Loan (and, to the extent any Delayed Draw Term Loans are then outstanding, the original principal amount of such loans) and continuing on each of the following eleven quarter-end payment dates;

(b) 1.875 % of the original principal amount of the Term Loan (and, to the extent any Delayed Draw Term Loans are then outstanding, the original principal amount of such loans) on each of the next eight quarter-end payment dates;

and (c) all remaining principal of the Term Loan and the Delayed Draw Term Loans are due and payable in full on the Maturity Date.

The annual interest rates applicable to advances will be calculated, at the Company’s option, by using either a base rate, Daily Simple SOFR plus 0.10 %, or Term SOFR plus 0.10 %, and in each case, plus an applicable margin percentage that corresponds to the Company’s consolidated net leverage ratio.

Subject to various requirements, the Company generally may (and, under certain circumstances, must), prepay all or a portion of the outstanding balance of the advances, together with accrued interest thereon, prior to their contractual maturity.

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

At September 30, 2022 and 2021, there was $ 271.9 million and $ 197.5 million, respectively, of principal outstanding under the Term Loan, $ 105.1 million and $ 20.0 million, respectively, of principal outstanding under the Revolving Credit Facility, and availability of $ 208.6 million and $ 193.7 million, respectively, under the Revolving Credit Facility, including a reduction for outstanding letters of credit.

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

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

The Credit Agreement also requires the Company to satisfy certain financial covenants, including a minimum fixed charge coverage ratio of 1.20 -to-1.00 and a maximum consolidated leverage ratio of 3.50 -to-1.00, subject to certain adjustments.

At September 30, 2022 and 2021, the Company’s fixed charge coverage ratio was 2.56 -to-1.00 and 3.29 -to-1.00, respectively, and the Company’s consolidated leverage ratio was 2.79 -to-1.00 and 1.99 -to-1.00, respectively.

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

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

At September 30, 2022 and 2021, the aggregate notional value of these interest rate swap agreements was $ 300.0 million and $ 198.3 million, respectively, and the fair value was $ 24.7 million and $( 0.8 ) million, respectively, which is included within other assets or other long-term liabilities on the Company’s Consolidated Balance Sheets.

The scheduled contractual repayment terms of long-term debt at September 30, 2022 are as follows:

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

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

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

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

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

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The Registration Rights Agreement expires on May 4, 2023.

Treasury Stock

During the fiscal year ended September 30, 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.

The Company received another 1,523 shares of Class A common stock through forfeitures of restricted stock awards by terminated employees.

Note 13 - Earnings Per Share

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Effect of dilutive securities:

Restricted stock grants 136,258 147,723 6,061

Restricted stock unit grants 183,861 136,258 147,723

Weighted average number of diluted common

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Note 14 - Equity-Based Compensation

Restricted Stock Awards

Restricted Stock Units

A summary of the changes in the Company's restricted stock units ("RSUs") is as follows:

For the Fiscal Year Ended September 30,

2022 2021 2020

RSUs Weighted Average Grant Date Fair Value Per RSU RSUs Weighted Average Grant Date Fair Value Per RSU RSUs Weighted Average Grant Date Fair Value Per RSU

Unvested, beginning balance 595,561 $ 25.42 292,534 $ 12.88 292,534 $ 12.88

Granted 256,167 32.62 510,733 26.52 — —

Vested ( 134,481 ) 18.19 ( 207,706 ) 10.47 — —

Forfeited ( 1,523 ) 33.77 — — — —

Unvested, ending balance 715,724 $ 29.34 595,561 $ 25.42 292,534 $ 12.88

The Company measures and recognizes stock-based compensation expense, net of forfeitures, over the requisite vesting periods for all stock-based payment awards made, and recognizes forfeitures as they occur.

Stock-based compensation is included in general and administrative expenses in the Consolidated Statements of Comprehensive Income.

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

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During the fiscal years ended September 30, 2022, 2021 and 2020, the Company recorded $ 0.4 million, $ 1.3 million and $ 1.6 million, respectively, of compensation expense in connection with these grants, which is reflected as general and administrative expenses in the Company’s Consolidated Statements of Comprehensive Income.

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

At September 30, 2022, the Company had no unrecognized compensation expense related to these awards due to full vesting.

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.

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

During the fiscal years ended September 30, 2022 and 2021, the Company recorded compensation expense of $ 3.5 million and $ 2.2 million, respectively, in connection with these grants, which is reflected as general and administrative expenses in the Company’s Consolidated Statements of Comprehensive Income.

At September 30, 2022, there was approximately $ 7.8 million of unrecognized compensation expense related to these awards, which will be recognized over a remaining weighted-average period of 2.5 years.

During the fiscal year ended September 30, 2022, the Company awarded a total of 256,167 restricted shares of Class A common stock to certain members of Company management under the Equity Incentive Plan.

The grants are classified as equity awards.

The aggregate grant date fair value of these restricted awards was $ 8.3 million.

During the fiscal year ended September 30, 2022, the Company recorded compensation expense in connection with these grants in the amount of $ 3.1 million, which is reflected as general and administrative expenses in the Company’s Consolidated Statements of Comprehensive Income.

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

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

At September 30, 2022, there was approximately $ 5.2 million of unrecognized compensation expense related to these awards, which will be recognized over a remaining weighted-average period of 2.4 years.

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

Fiscal Year Number of Shares

Total 715,724

Performance Stock Units

Performance stock units ("PSUs") provide for the issuance of shares of Class B common stock upon vesting, which occurs at the end of the performance period based on achievement of certain Company performance metrics established by the Compensation Committee of the Company’s Board of Directors.

The final number of shares of common stock issuable upon vesting of PSUs can range from 0 % to 150 % of the number of PSUs initially granted, depending on the level of achievement, as determined by the Compensation Committee of the Company’s Board of Directors.

The achievement of performance goals is modified by the total shareholder return ranking of the Company against the Russell 2000 Index over the performance period and can increase or decrease the achieved award by up to 15 %.

The Company recognizes expense, net of estimated forfeitures, for PSUs based on the forecasted achievement of the Company performance metrics, multiplied by the fair value of the total number of shares of common stock that the Company anticipates will be issued based on such achievement.

During the fiscal year ended September 30, 2022, the Company awarded PSUs of 131,341 shares and forecasted vesting of 98,505 restricted shares of Class B common stock to certain members of Company management under the Equity Incentive Plan.

The grants are classified as equity awards.

The aggregate grant date fair value of these restricted awards was $ 3.0 million.

During the fiscal year ended September 30, 2022, the Company recorded compensation expense in connection with these grants in the amount of $ 1.0 million, which is reflected as general and administrative expenses in the Company’s Consolidated Statements of Comprehensive Income.

At September 30, 2022, there was approximately $ 2.0 million of unrecognized compensation expense related to these awards.

Note 15 - Provision for Income Taxes

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Amortization of finite-lived intangible assets 943 586

State net operating loss 488 664

Federal net operating loss carryforward 2,632 —

State net operating loss carryforward 1,205 488

Employee benefits 1,986 736

Acquisition liabilities 2,127 —

Accrued insurance claims 911 1,610

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Property, plant and equipment ( 24,131 ) ( 14,530 )

Interest rate swap contract ( 5,692 ) —

Other ( 1,260 ) ( 459 )

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Net deferred tax assets (liabilities) $ ( 26,713 ) $ ( 17,362 )

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

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

At September 30, 2022 and 2021, the Company had federal net operating loss carryforwards of $ 10.5 million and $ 0.0 million , respectively, and state net operating loss carryforwards of $ 38.0 million and $ 15.2 million, respectively.

The federal net operating loss credit carryforward is indefinite and the state net operating loss credit carryforwards expire in varying amounts between the fiscal years ended September 30, 2032 and 2041 or are indefinite.

statutory federal income tax rate applicable to the Company was 21% during the fiscal years ended September 30, 2022, 2021 and 2020.

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Based on the provisions of ASC 740, the Company had no material unrecognized tax benefits at September 30, 2022 or 2021.

Due to the utilization of net operating loss carryforwards, the Company’s federal income tax returns for fiscal years ended September 30, 2015 through September 30, 2021 are subject to examination.

Various state income tax returns for fiscal years ended September 30, 2012 through September 30, 2021 are also subject to examination.

Due to the utilization of net operating loss carryforwards, the Company’s federal income tax returns for fiscal years ended September 30, 2018 through 2022 are subject to examination.

Various state income tax returns for fiscal years ended September 30, 2011 through 2022 are also subject to examination.

Note 16 - Employee Benefit Plans

The Company offers a 401(k) retirement plan covering substantially all employees who are at least 18 years old and have more than one year of service.

The Company offers a 401(k) retirement plan covering substantially all employees who are at least 18 years old and have more than six months of service.

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

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Amounts outstanding under the advances did not bear interest and matured in full in March 2021.

In March 2021, the subsidiary of the Company amended and restated the terms of the repayment obligation, as a result of which the officer personally assumed the remaining balance of the

In March 2021, the subsidiary of the Company amended and restated the terms of the repayment obligation, as a result of which the officer personally assumed the remaining balance of the obligation.

No new amounts were advanced to the officer by the Company or any subsidiary or affiliate thereof in connection with the transaction.

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• Entities owned by immediate family members of an executive officer of the Company perform subcontract work for a subsidiary of the Company, including trucking and grading services (“Subcontracting Services”).

• From time to time, a subsidiary of the Company provides construction services to various companies owned by family members of an executive officer of the Company (“Construction Services”).

• Since June 1, 2014, the Company has been a party to an access agreement with Island Pond Corporate Services, LLC, which provides a location for the Company to conduct business development activities from time to time on a property owned by the Executive Chairman of the Company’s Board of Directors (“Island Pond”).

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

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

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

• The Company is party to a management services agreement with SunTx, under which the Company pays SunTx $ 0.29 million per fiscal quarter and reimburses certain travel and other out-of-pocket expenses associated with services rendered under the management services agreement.

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Subcontracting Services ( 8,655 ) (1) ( 9,385 ) (1) ( 11,110 ) (1) ( 695 ) ( 563 )

Construction Services 181 824 5,936 — 123

Island Pond ( 320 ) (2) ( 320 ) (2) ( 320 ) (2) — —

Vehicles - Purchases ( 698 ) (3) ( 869 ) (3) ( 441 ) (3) — —

Vehicles - Rent expense ( 177 ) (1) ( 677 ) (1) ( 1,050 ) (1) — —

Consulting Services ( 32 ) (2) ( 271 ) (2) ( 265 ) (2) — —

SunTx ( 1,451 ) (2) ( 1,935 ) (2) ( 1,403 ) (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 and equipment, net, on the Company’s Consolidated Balance Sheets.

Note 18 - Commitments and Contingencies

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Under the Revolving Credit Facility, the Company has a total capacity of $ 325.0 million that may be used for a combination of cash borrowings and letter of credit issuances.

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

At each of September 30, 2022 and 2021, the Company had aggregate letters of credit outstanding in the amount of $ 11.3 million, primarily related to certain insurance policies as described in Note 2 - Significant Accounting Policies.

Purchase Commitments

As of September 30, 2021, the Company had unconditional purchase commitments for diesel fuel in the normal course of business in the aggregate amount of $ 0.1 million.

As of September 30, 2022, the Company had unconditional purchase commitments for diesel fuel and natural gas in the normal course of business in the aggregate amount of $ 5.2 million and $ 1.2 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.

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Fiscal Year Amount

Total $ 6,412

Minimum Royalties

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Note 19 - Joint Venture

In November 2017, one of the Company’s wholly owned subsidiaries entered into a joint venture agreement (the “JV”) with a third party for the sole purpose of bidding on and performing a construction project for the Alabama Department of Transportation.

One of the Company’s wholly owned subsidiaries is party to a joint venture agreement (the “JV”) with a third party for the sole purpose of bidding on and performing a construction project for the Alabama Department of Transportation.

The Company and the third party each own a 50 % partnership interest in the JV and share revenue and expenses equally.

The JV is jointly managed by representatives of the Company and the third party, and all labor, material and equipment required to perform the contract is subcontracted, with both of the participants of the JV performing some portion of the subcontracted work.

The JV is jointly managed by

representatives of the Company and the third party, and all labor, material and equipment required to perform the contract is subcontracted, with both of the participants of the JV performing some portion of the subcontracted work.

The Company accounts for this joint venture as an equity method investment in accordance with GAAP.

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

At each of September 30, 2022 and 2021, the Company’s investment in the JV was $ 0.1 million, which is reflected as “Investment in joint venture” on the Company’s Consolidated Balance Sheets.

During the fiscal years ended September 30, 2022, 2021 and 2020, the Company recognized $ 0.0 million , $ 0.0 million and $ 0.6 million, respectively, of pre-tax income, representing its 50 % interest in the earnings of the JV, which is reflected as “Earnings from investment in joint venture” on the Company’s Consolidated Statements of Comprehensive Income.

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For the Fiscal Year Ended September 30,

2022 2021 2020

Operating lease cost $ 2,568 $ 2,475 $ 3,498

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Note 21 - Fair Value Measurements

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

September 30,

Level 2 Level 2

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

Fair Value Measurement at Reporting Date Using

September 30, 2022 Level 1 Level 2 Level 3

Commodity swap contracts $ — $ 1,187 $ —

Interest rate swaps — 24,719 —

Corporate debt securities — 2,537 —

government securities — 2,481 —

Municipal government securities — 1,055 —

Other debt securities — 793 —

Total Assets $ — $ 32,772 $ —

Commodity swap contracts $ — $ 661 $ —

Interest rate swap contracts 845 1,708

Total Liabilities $ — $ 661 $ —

Fair Value Measurement at Reporting Date Using

September 30, 2021 Level 1 Level 2 Level 3

Commodity swap contracts $ — $ 1,812 $ —

Total Assets $ — $ 1,812 $ —

Interest rate swaps $ — $ 845 $ —

Total Liabilities $ — $ 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.

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

Debt securities primarily consist of corporate bonds and U.S.

Government and agency obligations.

The fair value of these investments is determined based on market quotes.

These investments are included within "Restricted Investments" on the Company's Consolidated Balance Sheets.

Note 22 - Investment in Derivative Instruments

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

The Company would discontinue hedge

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

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

Commodity Swap Contracts

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Change in Change in Change in

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

Realized Gain (Loss) Unrealized Gain (Loss) Total Gain (Loss) Realized Gain (Loss) Unrealized Gain (Loss) Total Gain (Loss) Realized Gain (Loss) Unrealized Gain (Loss) Total Gain (Loss)

Cost of revenues $ 3,472 $ ( 1,286 ) $ 2,186 $ 830 $ 2,315 $ 3,145 $ ( 432 ) $ ( 503 ) $ ( 935 )

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Other assets - commodity swaps 155 822

Other assets - interest rate swap (1)

Accrued expense and other current liabilities - commodity swaps ( 601 ) —

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

( 748 ) ( 1,708 )

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

Net unrealized gain (loss) position $ 25,245 $ 967

(1) Includes designated cash flow hedge of $ 24,719 as of September 30, 2022.

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

Note 23 - Other Comprehensive Income

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

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

The Company’s interest rate swap contract hedge included in other comprehensive income for the fiscal year ended September 30, 2022 was entered into on July 1, 2022 with an original notional value of $ 300.0 million.

The maturity date of this swap is June 30, 2027.

The Company received a credit of $ 12.6 million under the "blend and extend" arrangement utilizing the fair values of the existing interest rate swap agreements at June 30, 2022.

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

AOCI 2022 2021 2020

Interest rate swap contract ( 23 ) — —

Interest rate swap contract, net of blend and extend arrangement 23,761 ( 31 ) —

Unrealized loss on available-for-sale securities ( 566 ) — —

Less tax effect of other comprehensive income (loss) items ( 5,575 ) 8 —

Total $ 17,620 $ ( 23 ) $ —

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

AOCI Interest Rate Hedge

Balance at September 30, 2020 —

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Balance at September 30, 2022 $ 17,620

Net OCI changes ( 23 )

Balance at September 30, 2021 $ ( 23 )

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

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Balance at end of year $ 2,858 $ 2,788

(1) See Note 4 - Business Acquisitions

Note 25 - 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 fiscal year ended September 30, 2021, due to the uncertainties surrounding the COVID-19 pandemic, it is unable to predict the impact that the COVID-19 pandemic will have on its financial position, operating results and cash flows in future periods.

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

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

Note 26 - Legal Settlement

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

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

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

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

Note 25 - Investments

The following is a summary of the Company's debt securities as of September 30, 2022 (in thousands):

September 30, 2022

Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value

Corporate debt securities $ 2,797 $ — $ 260 $ 2,537

government securities 2,622 — 141 2,481

Municipal government securities 1,151 — 96 1,055

Other debt securities 862 — 69 793

Total $ 7,432 $ — $ 566 $ 6,866

The amortized cost and fair value of debt securities classified as available for sale by contractual maturity, as of September 30, 2022, are as follows (in thousands):

September 30, 2022

Amortized Cost Fair Value

Less than five years $ 4,836 $ 4,562

Six to ten years 2,252 1,984

Greater than ten years 344 320

Total $ 7,432 $ 6,866

Note 26 - Unpaid Losses and Loss Adjustment Expenses

The following is a summary of the Company's activity in the liability for loss and loss adjustment expense reserves for workers' compensation, general liability and automobile liability as of as of September 30, 2022 and 2021 (in thousands):

For the Fiscal Year Ended September 30,

Balance at beginning of year $ 9,941 $ 8,697

Total incurred 5,993 6,323

Total paid ( 4,643 ) ( 5,079 )

Balance at end of year $ 11,291 $ 9,941

Note 27 - Condensed Financial Statements of Parent Company

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Deferred income taxes, net — 892

Due from subsidiaries 58,593 —

Other assets 28,140 2,014

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Accrued expenses and other current liabilities 3,477 2,970

Current maturities of long-term debt 1,204 238

Total current liabilities 4,681 49,512

1 unchanged sentence

Due to subsidiaries 39,275 —

Deferred income taxes, net 4,553 —

Long-term debt, net of current maturities and debt issuance costs 77,589 24,440

Other long-term liabilities — 748

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Class A common stock, par value $ 0.001 ;

400,000,000 shares authorized, 36,600,639 shares issued and outstanding at September 30, 2021, and 33,875,884 shares issued and outstanding at September 30, 2020

400,000,000 shares authorized, 41,195,730 shares issued and 41,193,024 shares outstanding at September 30, 2022, and 36,600,639 shares issued and outstanding at September 30, 2021

Class B common stock, par value $ 0.001 ;

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Additional paid-in capital 256,571 248,571

Treasury stock, at cost, 2,706 shares of Class A common stock at September 30, 2022, and no shares at September 30, 2021, par value $ 0.001

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

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Equity in net income of subsidiaries $ 24,690 $ 25,505 $ 43,712

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

General and administrative expenses ( 4,758 ) ( 6,399 ) ( 4,167 )

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Other comprehensive (loss), net of tax

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

Unrealized gain (loss) on interest rate swap contract, net 18,091 ( 23 ) —

Unrealized (loss) on restricted investments, net ( 448 ) — —

Other comprehensive (loss) 17,643 ( 23 ) —

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Equity in net income of subsidiaries ( 24,690 ) ( 25,505 ) ( 43,712 )

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

Deferred income tax benefit ( 248 ) ( 451 ) ( 425 )

Other non-cash adjustments ( 73 ) 9 —

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Change in amounts due to (from) subsidiaries, net ( 65,622 ) ( 6,296 ) 34,150

Payment of treasury stock purchase obligation — — ( 569 )

Proceeds from sale of stock — — 3

Purchase of treasury stock ( 39 ) — —

Principal payments on long-term debt ( 420 ) — —

Proceeds from issuance of long-term debt, net of debt issuance costs and discount 54,527 — —

Net cash (used in) provided by financing activities ( 11,554 ) ( 6,296 ) 34,150

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Note to Condensed Financial Statements of Parent Company

On December 31, 2019, the Company completed an internal reorganization by merging Construction Partners Holdings, Inc.

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

Therefore, the condensed parent company-only financial statements above reflect the retroactive combination of these entities as if it had occurred on October 1, 2018 for comparative purposes.

The presentation change for September 30, 2019 had no effect on previously reported net income of the Company.

These condensed parent company-only financial statements have been prepared in accordance with Rule 12-04, Schedule I of Regulation S-X, as the restricted net assets of the subsidiaries of Construction Partners, Inc.

1 unchanged sentence

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

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

using the equity method.

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

Note 28 - Subsequent Events

Georgia Reorganization

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

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

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

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

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

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

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

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

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

The amount of the purchase price exceeding the preliminary net fair value of identifiable assets acquired and liabilities assumed is expected to be recorded as goodwill in the aggregate amount of approximately $ 35.0 million, which is deductible for income tax purposes.

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

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

Formation of Captive Insurance Company

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

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

Amendment to Credit Agreement

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

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

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

Restricted Stock Awards

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

The grant is classified as an equity award.

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

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

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

Conversion of Class B Common Stock to Class A Common Stock

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

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

On November 3, 2022, the Company awarded a total of 150,798 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 and have four-year graded vesting.

The aggregate grant date fair value of these restricted awards was $ 4.6 million.

Performance Stock Units

On November 3, 2022, the Company awarded PSUs of 84,371 shares of Class A common stock to certain executive officers of the Company under the Equity Incentive Plan.

The grants are classified as equity awards.

The aggregate grant date fair value of these restricted awards was $ 2.6 million.

The PSUs provide for the issuance of shares of Class A common stock upon vesting, which occurs over a three-year performance period based on achievement of the following metrics:

(i) compound aggregate revenue growth rate and (ii) average Adjusted EBITDA margin.

The final number of shares of Class A common stock issuable upon vesting of PSUs can range from 0 % to 150 % of the number of PSUs initially granted, depending on the level of achievement, as determined by the Compensation Committee of the Company’s Board of Directors.

Treasury Stock

On November 4, 2022, the Company received a total of 5,267 shares of Class A common stock from employees for reimbursement of income taxes paid by the Company on behalf of these employees related to restricted stock awards that vested on September 30, 2022.

Amendment to Credit Agreement

On November 18, 2022, the Company and each of its wholly owned subsidiaries (collectively, the “Borrowers”) entered into a First Amendment to the Third Amended and Restated Credit Agreement (the “Amendment” and the “Credit Agreement,” respectively).

Among other things, the Amendment modified the provisions of the Credit Agreement requiring a prepayment of outstanding indebtedness following a disposition of property or assets exceeding certain thresholds.

As a result of the Amendment, the Borrowers may receive up to $ 10.0 million in the aggregate of net cash proceeds from the disposal of property or assets (other than inventory in the ordinary course of business) in any fiscal year without the requirement to prepay any outstanding indebtedness.

However, the Borrowers also may reinvest all or any portion of such net cash proceeds in fixed capital or operating assets, including real property (which reinvested amount will not count against the $ 10.0 million threshold), provided that (i) if any of the disposed property or assets constitute collateral under the Credit Agreement, the reinvestment must be in fixed capital or operating investments that also constitute collateral, (ii) the reinvestment (or entry into a definitive agreement providing for such reinvestment) must occur within 180 days after receipt of such net cash proceeds and (iii) if a definitive agreement to reinvest the net cash proceeds has been executed within such 180 -day period, then the reinvestment must occur within 180 days after the entering into such definitive agreement.

Any net cash proceeds not reinvested or subject to a definitive agreement must be applied to the prepayment of the outstanding indebtedness upon the conclusion of the applicable 180 -day period.

Acquisition of HMA Plants and Disposition of Quarry

On November 18, 2022, the Company’s Alabama-based subsidiary acquired three HMA plants in the Nashville, Tennessee metro area from Blue Water Industries.

The transaction extended the Company’s footprint into the fast-growing Nashville, Tennessee metro area.

In connection with the transaction, the Company’s North Carolina-based subsidiary received cash and transferred ownership of its Daurity Springs Quarry in North Carolina to Blue Water Industries, while retaining aggregate sourcing rights from the quarry for its HMA plants in the central North Carolina area.

The Company received net cash consideration of $ 28.0 million related to these transactions.

The total amount of consideration for these transactions remains subject to post-closing adjustments with respect to inventory quantities and other matters as of the date of this report.

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

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

What changed 10-K

Item 8. Financial Statements and Supplementary Data