What changed in this filing

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Item 1. Financial Statements

2023-08-08 compared with 2023-05-09 · 154 added, 145 removed, 608 unchanged (33% of the section changed)

3 unchanged sentences

(in thousands, except share data)

March 31, September 30,

June 30, September 30,

ASSETS (unaudited)

32 unchanged sentences

Preferred stock, par value $ 0.001 ;

10,000,000 shares authorized and no shares issued and outstanding at March 31, 2023 and September 30, 2022

10,000,000 shares authorized and no shares issued and outstanding at June 30, 2023 and September 30, 2022

Class A common stock, par value $ 0.001 ;

400,000,000 shares authorized, 41,376,528 shares issued and 41,366,691 shares outstanding at March 31, 2023 and 41,195,730 shares issued and 41,193,024 shares outstanding at September 30, 2022

400,000,000 shares authorized, 43,760,546 shares issued and 43,728,310 shares outstanding at June 30, 2023 and 41,195,730 shares issued and 41,193,024 shares outstanding at September 30, 2022

Class B common stock, par value $ 0.001 ;

100,000,000 shares authorized, 14,275,867 shares issued and 11,352,915 shares outstanding at March 31, 2023 and September 30, 2022

100,000,000 shares authorized, 11,921,463 shares issued and 8,998,511 shares outstanding at June 30, 2023 and 14,275,867 shares issued and 11,352,915 shares outstanding at September 30, 2022

Additional paid-in capital 264,480 256,571

Treasury stock, at cost, 9,837 shares of Class A common stock at March 31, 2023 and 2,706 shares at September 30, 2022, par value $ 0.001

Treasury stock, at cost, 32,236 shares of Class A common stock at June 30, 2023 and 2,706 shares at September 30, 2022, par value $ 0.001

( 178 ) ( 39 )

Treasury stock, at cost, 2,922,952 shares of Class B common stock at March 31, 2023 and September 30, 2022, par value $ 0.001

Treasury stock, at cost, 2,922,952 shares of Class B common stock at June 30, 2023 and September 30, 2022, par value $ 0.001

( 15,603 ) ( 15,603 )

5 unchanged sentences

CONSTRUCTION PARTNERS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

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

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

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

2023 2022 2023 2022

5 unchanged sentences

Gain on facility exchange — — 5,389 —

Operating income (loss) ( 2,551 ) ( 11,489 ) 3,777 ( 3,030 )

Operating income 33,340 17,999 37,117 14,969

Interest expense, net ( 5,039 ) ( 2,054 ) ( 13,801 ) ( 4,177 )

Other income 493 178 925 337

Loss before provision for income taxes ( 6,955 ) ( 12,305 ) ( 4,553 ) ( 4,994 )

Income before provision for income taxes 28,794 16,123 24,241 11,129

Provision for income taxes 7,117 3,955 6,153 2,868

Net loss ( 5,481 ) ( 9,418 ) ( 3,589 ) ( 3,907 )

Net income 21,677 12,168 18,088 8,261

Other comprehensive income (loss), net of tax

Unrealized gain (loss) on interest rate swap contract, net 4,127 1,729 ( 625 ) 8,754

Unrealized gain (loss) on restricted investments, net 81 ( 122 ) 117 ( 122 )

Unrealized loss on restricted investments, net ( 129 ) ( 154 ) ( 12 ) ( 276 )

Other comprehensive income (loss) 3,998 1,575 ( 637 ) 8,478

Comprehensive income (loss) $ ( 8,860 ) $ ( 3,960 ) $ ( 8,224 ) $ 2,996

Net loss per share attributable to common stockholders:

Comprehensive income $ 25,675 $ 13,743 $ 17,451 $ 16,739

Net income per share attributable to common stockholders:

Basic $ 0.42 $ 0.23 $ 0.35 $ 0.16

7 unchanged sentences

(unaudited in thousands, except share data)

For the six months ended March 31, 2023

For the Nine Months Ended June 30, 2023

Class A Common Stock Class B Common Stock Additional

14 unchanged sentences

March 31, 2023 41,376,528 $ 41 14,275,867 $ 15 $ 261,743 $ ( 178 ) $ ( 15,603 ) $ 193,685 $ 12,985 $ 452,688

For the six months ended March 31, 2022

Net income — — — — — — — 21,677 — 21,677

Equity-based compensation expense — — — — 2,737 — — — — 2,737

Issuance of stock awards 29,614 — — — — — — — — —

Conversion of Class B common stock to Class A common stock 2,354,404 3 ( 2,354,404 ) ( 3 ) — — — — — —

Other comprehensive income — — — — — — — — 3,998 3,998

June 30, 2023 43,760,546 $ 44 11,921,463 $ 12 $ 264,480 $ ( 178 ) $ ( 15,603 ) $ 215,362 $ 16,983 $ 481,100

For the Nine Months Ended June 30, 2022

Class A Common Stock Class B Common Stock Additional

18 unchanged sentences

March 31, 2022 41,193,222 $ 41 14,275,867 $ 15 $ 251,817 $ ( 39 ) $ ( 15,603 ) $ 171,991 $ 6,880 $ 415,102

Net income — — — — — — — 12,168 — 12,168

Equity-based compensation expense — — — — 1,848 — — — — 1,848

Issuance of stock awards 2,508 — — — — — — — — —

Other comprehensive income — — — — — — — — 1,575 1,575

June 30, 2022 41,195,730 $ 41 14,275,867 $ 15 $ 253,665 $ ( 39 ) $ ( 15,603 ) $ 184,159 $ 8,455 $ 430,693

See notes to consolidated financial statements (unaudited).

2 unchanged sentences

(unaudited in thousands)

For the Six Months Ended March 31,

For the Nine Months Ended June 30,

Cash flows from operating activities:

Net loss $ ( 3,589 ) $ ( 3,907 )

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

Net income $ 18,088 $ 8,261

Adjustments to reconcile net income to net cash, cash equivalents and restricted cash provided by (used in) operating activities:

Depreciation, depletion, accretion and amortization of long-lived assets 57,769 50,291

18 unchanged sentences

Other long-term liabilities 4,053 3,825

Net cash provided by operating activities, net of acquisitions 45,696 3,294

Net cash provided by (used in) operating activities, net of acquisitions 94,542 ( 9,721 )

Cash flows from investing activities:

33 unchanged sentences

The Company was formed as a Delaware corporation in 2007 as a holding company to facilitate an acquisition growth strategy in the HMA paving and construction industry.

SunTx Capital Partners (“SunTx”), a private equity firm based in Dallas, Texas, together with its principals and their respective affiliates, has owned a controlling interest in the Company’s stock since the Company’s inception.

SunTx Capital Partners (“SunTx”), a private equity firm based in Dallas, Texas, together with its principals and their respective affiliates and family members, has owned a controlling interest in the Company’s stock since the Company’s inception.

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

31 unchanged sentences

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

The Company had restricted cash of $ 0.1 million at March 31, 2023 and at September 30, 2022.

The Company had restricted cash of $ 0.1 million at June 30, 2023 and at September 30, 2022.

Restricted Investments

5 unchanged sentences

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.

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

These securities have been classified as non-current assets based on their respective maturity dates and the Company’s intent to reinvest sales proceeds into new restricted investments.

The Company had restricted investments of $ 11.3 million and $ 6.9 million at March 31, 2023 and September 30, 2022, respectively.

The Company had restricted investments of $ 13.4 million and $ 6.9 million at June 30, 2023 and September 30, 2022, respectively.

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

3 unchanged sentences

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 by which the fair value is less than the amortized cost basis.

For the six months ended March 31, 2023 and 2022, the Company had no intent impairments or credit losses.

For the nine months ended June 30, 2023 and 2022, the Company had no intent impairments or credit losses.

Contracts Receivable Including Retainage, Net

26 unchanged sentences

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

No single customer accounted for more than 10% of the Company’s contracts receivable including retainage, net balance at March 31, 2023 or September 30, 2022.

Projects performed for various departments of transportation accounted for 29.8 % and 30.8 % of consolidated revenues for the three months ended March 31, 2023 and 2022, respectively, and for 30.9 % and 32.3 % of consolidated revenues for the six months ended March 31, 2023 and 2022, respectively.

Customers that accounted for more than 10% of consolidated revenues during the three and six months ended March 31, 2023 and 2022 are presented below:

No single customer accounted for more than 10% of the Company’s contracts receivable including retainage, net balance at June 30, 2023 or September 30, 2022.

Projects performed for various departments of transportation accounted for 38.6 % and 43.7 % of consolidated revenues for the three months ended June 30, 2023 and 2022, respectively, and for 32.0 % and 37.2 % of consolidated revenues for the nine months ended June 30, 2023 and 2022, respectively.

Customers that accounted for more than 10% of consolidated revenues during the three and nine months ended June 30, 2023 and 2022 are presented below:

% of Consolidated Revenues

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

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

2023 2022 2023 2022

Alabama Department of Transportation * 14.4 % * 10.9 %

North Carolina Department of Transportation 11.2 % 13.6 % * 10.3 %

Florida Department of Transportation 11.2 % * 10.2 % 10.4 %

* Less than 10%

Revenues from Contracts with Customers

4 unchanged sentences

% of Consolidated Revenues

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

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

2023 2022 2023 2022

26 unchanged sentences

The Company’s private customer contracts are primarily fixed total price contracts, also known as lump sum contracts, which require that the total amount of work be performed for a single price.

Contract cost is recorded as incurred, and revisions in contract revenue and cost estimates are reflected in the accounting period when known.

Contract cost is recorded as incurred, and revisions in

contract revenue and cost estimates are reflected in the accounting period when known.

Changes in job performance, job conditions and estimated profitability, including those changes arising from contract change orders, penalty provisions and final contract settlements, may result in revisions to estimated revenues and costs and are recognized in the period in which the revisions are determined.

2 unchanged sentences

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

The Company accounts for the modification

using a cumulative catch-up adjustment.

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

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

22 unchanged sentences

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

The Company’s financial instruments include cash and cash equivalents, restricted cash, contracts receivable including retainage, accounts payable and accrued expenses reflected as current assets and current liabilities on its Consolidated Balance Sheets at March 31, 2023 and September 30, 2022.

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

The Company also has debt securities reflected as restricted investments on its Consolidated Balance Sheets at March 31, 2023 and September 30, 2022.

The Company also has debt securities reflected as restricted investments on its Consolidated Balance Sheets at June 30, 2023 and September 30, 2022.

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

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

The carrying value of amounts outstanding under these credit facilities is reflected as long-term debt, net of current maturities and deferred debt issuance cost and current maturities of long-term debt on the Company’s Consolidated Balance Sheets at March 31, 2023 and September 30, 2022.

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

9 unchanged sentences

Comprehensive Income

The Company reports comprehensive income in its Consolidated Statements of Comprehensive Income (Loss) and Consolidated Statements of Stockholders’ Equity.

Comprehensive income (loss) comprises two subsets:

net income and other comprehensive income (loss) (“OCI”).

The Company reports comprehensive income in its Consolidated Statements of Comprehensive Income and Consolidated Statements of Stockholders’ Equity.

Comprehensive income comprises two subsets:

net income and other comprehensive income (“OCI”).

OCI includes adjustments for changes in fair value of an interest rate swap contract derivative and available-for-sale restricted investments.

For additional information about comprehensive income, see Note 19 - Other Comprehensive Income (Loss).

For additional information about comprehensive income, see Note 19 - Other Comprehensive Income.

Note 3 - Accounting Standards

The Company did not adopt any new accounting standards or updates during the six months ended March 31, 2023.

The Company did not adopt any new accounting standards or updates during the nine months ended June 30, 2023.

Note 4 - Business Acquisitions

5 unchanged sentences

The transaction established the Company’s second platform company in North Carolina and added three HMA plants in the greater Charlotte/Rock Hill metro area.

Combined Acquisitions During the Six Months Ended March 31, 2023

South Carolina Acquisition - Provisional

On April 3, 2023, the Company acquired substantially all of the assets of Pickens Construction, Inc., an asphalt paving company headquartered in Anderson, South Carolina, for $ 5.0 million.

The transaction added an HMA plant in the greater Greenville, South Carolina metro area.

Alabama Acquisition - Provisional

On May 1, 2023, the Company acquired the Huntsville, Alabama operations of Southern Site Contractors, LLC., an excavation, grading and utility contractor, for $ 1.1 million.

The transaction enhanced the Company's vertical integration of construction services in the Huntsville, Alabama metro area.

Combined Acquisitions During the Nine Months Ended June 30, 2023

The foregoing acquisitions were accounted for as business combinations in accordance with Accounting Standards Codification (“ASC”) Topic 805, Business Combinations (“Topic 805”).

As of March 31, 2023, the purchase price allocation has not yet been finalized due to the recent timing of these acquisitions, as certain information was pending on such date to finalize estimates of fair value of certain assets acquired and liabilities assumed.

As of June 30, 2023, the purchase price allocation has not yet been finalized due to the recent timing of these acquisitions, as certain information was pending on such date 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.

12 unchanged sentences

The total consideration has been provisionally allocated as follows:

$ 9.3 million of net working capital, $ 35.3 million of property, plant and equipment, $ 32.2 million of goodwill and a $ 1.0 million working capital receivable.

The Consolidated Statements of Comprehensive Income (Loss) includes $ 17.8 million of revenue and $ 0.6 million of net loss attributable to the operations of these acquisitions for the three months ended March 31, 2023 and $ 22.0 million of revenue and $ 0.9 million of net loss attributable to the operations of these acquisitions for the six months ended March 31, 2023 from their respective acquisition dates.

The Company recorded certain costs to effect the acquisitions as they were incurred, which are reflected in general and administrative expenses on the Company’s Consolidated Statements of Comprehensive Income (Loss) in the amount of $ 0.0 million for the three months ended March 31, 2023 and $ 0.2 million for the six months ended March 31, 2023.

$ 10.4 million of net working capital, $ 39.4 million of property, plant and equipment, $ 6.1 million of various intangible assets and $ 27.0 million of goodwill.

The Consolidated Statements of Comprehensive Income include $ 26.4 million of revenue and $ 0.3 million of net income attributable to the operations of these acquisitions for the three months ended June 30, 2023 and $ 48.4 million of revenue and $ 0.6 million of net loss attributable to the operations of these acquisitions for the nine months ended June 30, 2023 from their respective acquisition dates.

The Company recorded certain costs to effect the acquisitions as they were incurred, which are reflected in general and administrative expenses on the Company’s Consolidated Statements of Comprehensive Income in the amount of $ 0.1 million for the three months ended June 30, 2023 and $ 0.3 million for the nine months ended June 30, 2023.

The following presents pro forma revenues and net income as though the acquisitions had occurred on October 1, 2021 (unaudited, in thousands):

For the Three Months Ended March 31,

For the Three Months Ended June 30,

Pro forma revenues $ 422,438 $ 407,264

Pro forma net loss $ ( 5,481 ) $ ( 10,053 )

For the Six Months Ended March 31,

Pro forma net income $ 21,779 $ 12,423

For the Nine Months Ended June 30,

Pro forma revenues $ 1,107,412 $ 975,910

Pro forma net loss $ ( 2,684 ) $ ( 4,001 )

Pro forma net income $ 18,997 $ 8,324

Pro forma financial information is presented as if the operations of the acquisitions had been included in the consolidated results of the Company since October 1, 2021, and gives effect to transactions that are directly attributable to the acquisitions, including adjustments to:

(a) include the pro forma results of operations of the acquisitions for the three and six months ended March 31, 2023 and 2022;

(a) include the pro forma results of operations of the acquisitions for the three and nine months ended June 30, 2023 and 2022;

(b) include additional depreciation and depletion expense related to the fair value of acquired property, plant and equipment and reserves at aggregates facilities, as applicable, as if such assets were acquired on October 1, 2021 and consistently applied to the Company’s depreciation and depletion methodologies;

(c) include interest expense as if the funds borrowed to finance the purchase prices were borrowed on October 1, 2021 (interest expense calculations further assume that no principal payments were made during the period from October 1, 2021 through March 31, 2023, and that the interest rate in effect on the date the Company made the acquisitions was in effect for the period from October 1, 2021 through March 31, 2023);

(d) exclude $ 0.2 million of acquisition-related expenses from the three and six months ended March 31, 2023, as though such expenses were incurred prior to the pro forma acquisition date of October 1, 2021.

(c) include interest expense as if the funds borrowed to finance the purchase prices were borrowed on October 1, 2021 (interest expense calculations further assume that no principal payments were made during the period from October 1, 2021 through June 30, 2023, and that the interest rate in effect on the date the Company made the acquisitions was in effect for the period from October 1, 2021 through June 30, 2023);

(d) exclude $ 0.3 million of acquisition-related expenses from the three and nine months ended June 30, 2023, as though such expenses were incurred prior to the pro forma acquisition date of October 1, 2021.

Pro forma information is presented for informational purposes and may not be indicative of revenue or net loss that would have been recorded if these acquisitions had occurred on October 1, 2022.

Measurement Period Adjustments

During the six months ended March 31, 2023, the Company made measurement period adjustments to previous year acquisitions, which resulted in a corresponding net increase to goodwill of $ 4.0 million.

During the nine months ended June 30, 2023, the Company made measurement period adjustments to previous year acquisitions, which resulted in a corresponding net increase to goodwill of $ 3.2 million.

Note 5 - Contracts Receivable Including Retainage, Net

Contracts receivable including retainage, net consisted of the following at March 31, 2023 and September 30, 2022 (in thousands):

March 31, 2023 September 30, 2022

Contracts receivable including retainage, net consisted of the following at June 30, 2023 and September 30, 2022 (in thousands):

June 30, 2023 September 30, 2022

Contracts receivable $ 208,586 $ 221,566

5 unchanged sentences

Note 6 - Contract Assets and Liabilities

Costs and estimated earnings compared to billings on uncompleted contracts at March 31, 2023 and September 30, 2022 consisted of the following (in thousands):

March 31, 2023 September 30, 2022

Costs and estimated earnings compared to billings on uncompleted contracts at June 30, 2023 and September 30, 2022 consisted of the following (in thousands):

June 30, 2023 September 30, 2022

Costs on uncompleted contracts $ 1,635,361 $ 1,520,510

3 unchanged sentences

Net billings in excess of costs and estimated earnings on uncompleted contracts $ ( 35,299 ) $ ( 23,206 )

Significant changes to balances of costs and estimated earnings in excess of billings (contract asset) and billings in excess of costs and estimated earnings (contract liability) on uncompleted contracts from September 30, 2022 to March 31, 2023 are presented below (in thousands):

Costs and Estimated Earnings in Excess of Billings on

3 unchanged sentences

Changes in revenue billed, contract price or cost estimates 4,178 ( 16,270 ) ( 12,093 )

March 31, 2023 (unaudited) $ 29,126 $ ( 62,004 ) $ ( 32,878 )

June 30, 2023 (unaudited) $ 33,449 $ ( 68,748 ) $ ( 35,299 )

Note 7 - Property, Plant and Equipment

Property, plant and equipment at March 31, 2023 and September 30, 2022 consisted of the following (in thousands):

March 31, 2023 September 30, 2022

Property, plant and equipment at June 30, 2023 and September 30, 2022 consisted of the following (in thousands):

June 30, 2023 September 30, 2022

Construction equipment $ 448,736 $ 402,581

9 unchanged sentences

Total property, plant and equipment, net $ 502,732 $ 481,412

Depreciation, depletion and amortization expense related to property, plant and equipment was $ 20.4 million and $ 17.0 million for the three months ended March 31, 2023 and 2022, respectively, and $ 39.7 million and $ 32.8 million for the six months ended March 31, 2023 and 2022, respectively.

Depreciation, depletion and amortization expense related to property, plant and equipment was $ 20.2 million and $ 17.6 million for the three months ended June 30, 2023 and 2022, respectively, and $ 59.9 million and $ 50.4 million for the nine months ended June 30, 2023 and 2022, respectively.

Note 8 - Debt

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

Debt at March 31, 2023 and September 30, 2022 consisted of the following (in thousands):

March 31, 2023 September 30, 2022

Debt at June 30, 2023 and September 30, 2022 consisted of the following (in thousands):

June 30, 2023 September 30, 2022

Long-term debt:

18 unchanged sentences

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 March 31, 2023 and September 30, 2022, there was $ 280.6 million and $ 271.9 million, respectively, of principal outstanding under the Term Loan, $ 143.1 million and $ 105.1 million, respectively, of principal outstanding under the Revolving Credit Facility, and availability of $ 171.9 million and $ 208.6 million, respectively, under the Revolving Credit Facility, including a reduction for outstanding letters of credit.

The Company also had $ 10.0 million and $ 25.0 million available under the Delayed Draw Term Loan at March 31, 2023 and September 30, 2022, respectively.

At June 30, 2023 and September 30, 2022, there was $ 277.5 million and $ 271.9 million, respectively, of principal outstanding under the Term Loan, $ 143.1 million and $ 105.1 million, respectively, of principal outstanding under the Revolving Credit Facility, and availability of $ 171.9 million and $ 208.6 million, respectively, under the Revolving Credit Facility, including a reduction for outstanding letters of credit.

The Company also had $ 10.0 million and $ 25.0 million available under the Delayed Draw Term Loan at June 30, 2023 and September 30, 2022, respectively.

The Credit Agreement contains customary negative covenants for agreements of this type, including, but not limited to, restrictions on

3 unchanged sentences

to-1.00 and a maximum consolidated leverage ratio of 3.50 -to-1.00, subject to certain adjustments.

At March 31, 2023 and September 30, 2022, the Company’s fixed charge coverage ratio was 1.47 -to-1.00 and 2.56 -to-1.00, respectively, and the Company’s consolidated leverage ratio was 2.92 -to-1.00 and 2.79 -to-1.00, respectively.

At both March 31, 2022 and September 30, 2022, the Company was in compliance with all covenants under the Credit Agreement.

At June 30, 2023 and September 30, 2022, the Company’s fixed charge coverage ratio was 2.00 -to-1.00 and 2.56 -to-1.00, respectively, and the Company’s consolidated leverage ratio was 2.27 -to-1.00 and 2.79 -to-1.00, respectively.

At both June 30, 2023 and September 30, 2022, the Company was in compliance with all covenants under the Credit Agreement.

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

At March 31, 2023 and September 30, 2022, the aggregate notional value of these interest rate swap agreements was $ 300.0 million, and the fair value was $ 18.9 million and $ 24.7 million, respectively, which is included within other assets on the Company’s Consolidated Balance Sheets.

At June 30, 2023 and September 30, 2022, the aggregate notional value of these interest rate swap agreements was $ 300.0 million, and the fair value was $ 24.5 million and $ 24.7 million, respectively, which is included within other assets on the Company’s Consolidated Balance Sheets.

Note 9 - Equity

6 unchanged sentences

Class A common stock is not convertible into any other class of the Company’s capital stock.

Conversion of Class B Common Stock to Class A Common Stock

During the nine months ended June 30, 2023, certain stockholders of the Company converted a total of 2,354,404 shares of Class B

common stock into shares of Class A common stock on a one -for-one basis.

As of June 30, 2023, there were 43,728,310 shares of

Class A common stock and 8,998,511 shares of Class B common stock outstanding.

Treasury Stock

During the six months ended March 31, 2023, 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 the vesting of restricted stock awards and 1,864 shares of Class A common stock through forfeitures of restricted stock awards by terminated employees.

During the nine months ended June 30, 2023, 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 the vesting of restricted stock awards and 24,263 shares of Class A common stock through forfeitures of restricted stock awards by terminated employees.

Restricted Stock Awards

During the six months ended March 31, 2023, the Company awarded a total of 180,798 restricted shares of Class A common stock to certain directors, officers and employees of the Company under the Construction Partners, Inc.

During the nine months ended June 30, 2023, the Company awarded a total of 210,412 restricted shares of Class A common stock to certain directors, officers and employees of the Company under the Construction Partners, Inc.

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

4 unchanged sentences

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

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

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

2023 2022 2023 2022

Net loss attributable to common stockholders $ ( 5,481 ) $ ( 9,418 ) $ ( 3,589 ) $ ( 3,907 )

Net income attributable to common stockholders $ 21,677 $ 12,168 $ 18,088 $ 8,261

Weighted average number of common shares outstanding, basic 51,827,448 51,793,245 51,826,578 51,760,384

Net loss per common share attributable to common stockholders, basic $ ( 0.11 ) $ ( 0.18 ) $ ( 0.07 ) $ ( 0.08 )

Net income per common share attributable to common stockholders, basic $ 0.42 $ 0.23 $ 0.35 $ 0.16

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

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

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

2023 2022 2023 2022

Net loss attributable to common stockholders $ ( 5,481 ) $ ( 9,418 ) $ ( 3,589 ) $ ( 3,907 )

Net income attributable to common stockholders $ 21,677 $ 12,168 $ 18,088 $ 8,261

Weighted average number of basic common shares outstanding, basic 51,827,448 51,793,245 51,826,578 51,760,384

2 unchanged sentences

Weighted average number of diluted common shares outstanding 52,293,846 51,888,511 52,114,438 51,928,427

Net loss per diluted common share attributable to common stockholders $ ( 0.11 ) $ ( 0.18 ) $ ( 0.07 ) $ ( 0.08 )

Net income per diluted common share attributable to common stockholders $ 0.41 $ 0.23 $ 0.35 $ 0.16

Note 11 - Provision for Income Taxes

1 unchanged sentence

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

The Company’s effective income tax rate for the three months ended March 31, 2023 and 2022 was 21.1 % and 23.5 %, respectively.

The Company’s effective tax rate for the six months ended March 31, 2023 and 2022 was 21.1 % and 21.8 %, respectively.

The Company’s effective income tax rate for the three months ended June 30, 2023 and 2022 was 24.7 % and 24.5 %, respectively.

The Company’s effective tax rate for the nine months ended June 30, 2023 and 2022 was 25.4 % and 25.8 %, respectively.

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

1 unchanged sentence

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

At March 31, 2023, $ 0.1 million and $ 0.3 million was reflected on the Company’s Consolidated Balance Sheets within other current assets and other assets, respectively, representing the remaining balances on this note receivable.

At June 30, 2023, $ 0.1 million and $ 0.3 million was reflected on the Company’s Consolidated Balance Sheets within other current assets and other assets, respectively, representing the remaining balances on this note receivable.

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

At March 31, 2023, $ 0.1 million and $ 0.2 million was reflected on the Company’s Consolidated Balance Sheets within other current assets and other assets, respectively, representing the remaining balances on this note receivable.

At June 30, 2023, $ 0.1 million and $ 0.2 million was reflected on the Company’s Consolidated Balance Sheets within other current assets and other assets, respectively, representing the remaining balances on this note receivable.

The notes do not bear interest, and repayments are scheduled to be made in periodic installments during fiscal year 2023 through fiscal year 2026.

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The note bears simple interest at a rate of 4.0 % and requires annual minimum payments of $ 0.1 million inclusive of principal and accrued interest, with any remaining principal and accrued interest due and payable in full on December 31, 2027.

As security for his payment obligations, the officer pledged as collateral 30,000 shares of the 140,389 shares of Class B common stock that had previously been pledged as collateral and 7,500 shares of Class A common stock owned by the officer personally.

Amounts outstanding under the note are reflected on the Company’s Consolidated Balance Sheets within other current assets and other assets (“Land Development Project”).

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(“SunTx”) $ 0.31 million per fiscal quarter and reimburses certain travel and other out-of-pocket expenses associated with services rendered under the management services agreement.

The following table presents revenues earned and expenses incurred by the Company during the three and six months ended March 31, 2023 and 2022, and accounts receivable and payable balances at March 31, 2023 and September 30, 2022, related to transactions with the related parties described above (in thousands):

Revenue Earned (Expense Incurred) Accounts Receivable (Payable)

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

The following table presents revenues earned and expenses incurred by the Company during the three and nine months ended June 30, 2023 and 2022, and accounts receivable and payable balances at June 30, 2023 and September 30, 2022, related to transactions with the related parties described above (in thousands):

Expense Incurred Accounts Receivable (Payable)

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

2023 2022 2023 2022 2023 2022

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Restricted Stock

During the three months ended March 31, 2023 and 2022, the Company recorded $ 2.2 million and $ 1.8 million, respectively, of compensation expense in connection with restricted stock awards.

During the six months ended March 31, 2023 and 2022, the Company recorded $ 4.2 million and $ 3.2 million, respectively, of compensation expense in connection with restricted stock awards.

At March 31, 2023, there was approximately $ 14.1 million of unrecognized compensation expense related to restricted stock awards.

During the three months ended June 30, 2023 and 2022, the Company recorded $ 2.2 million and $ 1.8 million, respectively, of compensation expense in connection with restricted stock awards.

During the nine months ended June 30, 2023 and 2022, the Company recorded $ 6.4 million and $ 5.1 million, respectively, of compensation expense in connection with restricted stock awards.

At June 30, 2023, there was approximately $ 12.1 million of unrecognized compensation expense related to restricted stock awards.

Performance Stock Units

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The Company recognizes expense, net of estimated forfeitures, for PSUs based on the forecasted level of achievement of the applicable performance metrics, multiplied by the fair value of the total number of shares of Class A common stock underlying the PSUs that the Company anticipates will be delivered upon vesting based on such achievement.

During the three months ended March 31, 2023 and 2022, the Company recorded $ 0.5 million and $ 0.0 million , respectively, of compensation expense in connection with PSUs.

During the six months ended March 31, 2023 and 2022, the Company recorded $ 1.0 million and $ 0.0 million , respectively, of compensation expense in connection with PSUs.

At March 31, 2023, there was approximately $ 3.1 million of unrecognized compensation expense related to PSUs.

During the three months ended June 30, 2023 and 2022, the Company recorded $ 0.5 million and $ 0.0 million , respectively, of compensation expense in connection with PSUs.

During the nine months ended June 30, 2023 and 2022, the Company recorded $ 1.5 million and $ 0.0 million , respectively, of compensation expense in connection with PSUs.

At June 30, 2023, there was approximately $ 2.6 million of unrecognized compensation expense related to PSUs.

Note 14 - Leases

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

As of March 31, 2023, operating leases under ASC Topic 842, Leases (“Topic 842”) were included in (i) operating lease right-of use assets, (ii) current portion of operating lease liabilities and (iii) operating lease liabilities, net of current portion on the Company’s Consolidated Balance Sheets in the amounts of $ 16.8 million, $ 2.2 million and $ 15.0 million, respectively.

As of March 31, 2023, the Company did not have any lease contracts that had not yet commenced but had created significant rights and obligations.

As of June 30, 2023, operating leases under ASC Topic 842, Leases (“Topic 842”) were included in (i) operating lease right-of use assets, (ii) current portion of operating lease liabilities and (iii) operating lease liabilities, net of current portion on the Company’s Consolidated Balance Sheets in the amounts of $ 17.5 million, $ 2.4 million and $ 15.6 million, respectively.

As of June 30, 2023, the Company did not have any lease contracts that had not yet commenced but had created significant rights and obligations.

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

For the Three Months Ended March 31,

For the Three Months Ended June 30,

Operating lease cost $ 817 $ 650

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Total lease expense $ 6,368 $ 6,348

For the Six Months Ended March 31,

For the Nine Months Ended June 30,

Operating lease cost $ 2,331 $ 1,884

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

As of March 31, 2023, the weighted-average remaining term of the Company’s leases was 10.8 years, and the weighted-average discount rate was 3.42 %.

As of March 31, 2023, the lease liability was equal to the present value of the remaining lease payments, discounted using the incremental borrowing rate on the Company’s secured debt using a single maturity discount rate, as such rate is not materially different from the discount rate applied to each of the leases in the portfolio.

The following table summarizes the Company’s undiscounted lease liabilities outstanding as of March 31, 2023 (unaudited, in thousands):

As of June 30, 2023, the weighted-average remaining term of the Company’s leases was 10.8 years, and the weighted-average discount rate was 3.47 %.

As of June 30, 2023, the lease liability was equal to the present value of the remaining lease payments, discounted using the incremental borrowing rate on the Company’s secured debt using a single maturity discount rate, as such rate is not materially different from the discount rate applied to each of the leases in the portfolio.

The following table summarizes the Company’s undiscounted lease liabilities outstanding as of June 30, 2023 (unaudited, in thousands):

Fiscal Year Amount

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The Company uses derivative instruments as part of its overall strategy to manage its exposure to market risks associated with fluctuations in interest rates.

The Company regularly monitor the financial stability and credit standing of the counterparties to its derivative instruments.

The Company regularly monitors the financial stability and credit standing of the counterparties to its derivative instruments.

The Company does not enter into derivative financial instruments for speculative purposes.

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(i) a hedge of a forecasted transaction or the variability of cash flows to be paid (“cash flow hedge”) or (ii) a hedge of the fair value of a recognized asset or liability (“fair value hedge”).

Changes in the fair value of a derivative that is qualified and designated as a cash flow hedge or net investment hedge are recorded in other comprehensive income (loss) in the Company’s Consolidated Statements of Comprehensive Income (Loss) until they are reclassified into earnings in the same period or periods during which the hedged transaction affects earnings.

Changes in the fair value of a derivative that is qualified and designated as a cash flow hedge or net investment hedge are recorded in other comprehensive income (loss) in the Company’s Consolidated Statements of Comprehensive Income until they are reclassified into earnings in the same period or periods during which the hedged transaction affects earnings.

Changes in the fair value of a derivative that is qualified and designated as a fair value hedge, along with the gain or loss on the hedged asset or liability that is attributable to the hedged risk, are recorded in current period earnings.

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Changes in fair value of commodity swaps are recognized in earnings.

The following table represents the approximate amount of realized and unrealized gains (losses) and changes in fair value recognized in earnings on interest and commodity derivative contracts for the three and six months ended March 31, 2023 and 2022 and the fair value of these derivatives as of March 31, 2023 and September 30, 2022 (in thousands):

For the Three Months Ended March 31,

The following table represents the approximate amount of realized and unrealized gains (losses) and changes in fair value recognized in earnings on interest and commodity derivative contracts for the three and nine months ended June 30, 2023 and 2022 and the fair value of these derivatives as of June 30, 2023 and September 30, 2022 (in thousands):

For the Three Months Ended June 30,

(unaudited) (unaudited)

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Total $ 1,407 $ 878 $ 2,285 $ 1,228 $ 459 $ 1,687

For the Six Months Ended March 31,

For the Nine Months Ended June 30,

(unaudited) (unaudited)

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Total $ 3,692 $ ( 1,408 ) $ 2,284 $ 1,176 $ 2,589 $ 3,765

March 31, 2023 September 30, 2022

June 30, 2023 September 30, 2022

Balance Sheet Classification (unaudited)

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Net unrealized gain position $ 23,596 $ 25,245

(1) Includes designated cash flow hedge of $ 18,882 and $ 24,719 as of March 31, 2023 and September 30, 2022, respectively.

(1) Includes designated cash flow hedge of $ 24,478 and $ 24,719 as of June 30, 2023 and September 30, 2022, respectively.

Note 16 - Fair Value Measurements

The following table presents the Company’s liabilities measured at fair value on a recurring basis as of March 31, 2023 and September 30, 2022 under ASC 820, Fair Value Measurements (in thousands):

March 31, 2023 September 30, 2022

The following table presents the Company’s liabilities measured at fair value on a recurring basis as of June 30, 2023 and September 30, 2022 under ASC 820, Fair Value Measurements (in thousands):

June 30, 2023 September 30, 2022

Level 2 Level 2

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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 March 31, 2023, the Company had aggregate letters of credit outstanding in the amount of $ 10.0 million, primarily related to certain insurance policies as described in Note 2 - Significant Accounting Policies.

At June 30, 2023, the Company had aggregate letters of credit outstanding in the amount of $ 10.0 million, primarily related to certain insurance policies as described in Note 2 - Significant Accounting Policies.

Purchase Commitments

As of March 31, 2023, the Company had unconditional purchase commitments for diesel fuel and natural gas in the normal course of business in the aggregate amount of $ 4.7 million.

As of June 30, 2023, the Company had unconditional purchase commitments for diesel fuel and natural gas in the normal course of business in the aggregate amount of $ 4.4 million.

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

As of March 31, 2023, the Company’s purchase commitments annually thereafter were as follows (unaudited, in thousands):

As of June 30, 2023, the Company’s purchase commitments annually thereafter were as follows (unaudited, in thousands):

Fiscal Year Amount

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however, certain agreements have minimum annual payments.

The Company had commitments in the form of minimum royalties as of March 31, 2023 in the amount of $ 2.5 million, due as follows (unaudited, in thousands):

The Company had commitments in the form of minimum royalties as of June 30, 2023 in the amount of $ 2.6 million, due as follows (unaudited, in thousands):

Fiscal Year Amount

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Total $ 2,556

Royalty expense recorded in cost of revenue was $ 0.4 million and $ 0.5 million for the three months ended March 31, 2023 and 2022, respectively, and $ 0.8 million for each of the six months ended March 31, 2023 and 2022.

Royalty expense recorded in cost of revenue was $ 0.4 million for each of the three months ended June 30, 2023 and 2022, and $ 1.2 million for each of the nine months ended June 30, 2023 and 2022.

Note 18 - Restricted Investments

The following is a summary of the Company’s debt securities as of March 31, 2023 and September 30, 2022 (in thousands):

March 31, 2023

The following is a summary of the Company’s debt securities as of June 30, 2023 and September 30, 2022 (in thousands):

June 30, 2023

Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value

Corporate debt securities $ 3,904 $ — $ 188 $ 3,716

government securities $ 6,007 $ — $ 175 $ 5,832

Corporate debt securities 4,774 — 242 4,532

Municipal government securities 1,928 — 86 1,842

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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 March 31, 2023, were as follows (unaudited, in thousands):

The amortized cost and fair value of debt securities classified as available for sale by contractual maturity, as of June 30, 2023, were as follows (unaudited, in thousands):

Amortized Cost Fair Value

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Total $ 13,934 $ 13,353

Note 19 - Other Comprehensive Income (Loss)

Comprehensive income (loss) comprises two subsets:

Note 19 - Other Comprehensive Income

Comprehensive income comprises two subsets:

net income and OCI.

The components of OCI are presented in the accompanying Consolidated Statements of Comprehensive Income (Loss) and Consolidated Statements of Stockholders’ Equity, net of applicable

The Company’s interest rate swap contract hedge included in other comprehensive income (loss) was entered into on July 1, 2022 with an original notional value of $ 300.0 million.

The components of OCI 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 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 March 31, 2023 and September 30, 2022, were as follows (in thousands):

AOCI March 31, 2023 (unaudited) September 30, 2022

Amounts in accumulated other comprehensive income (“AOCI”), net of tax, at June 30, 2023 and September 30, 2022, were as follows (in thousands):

AOCI June 30, 2023 (unaudited) September 30, 2022

Interest rate swap contract, net of blend and extend arrangement $ 23,206 $ 23,761

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Net OCI changes ( 637 )

Balance at March 31, 2023 (unaudited) $ 12,985

Balance at June 30, 2023 (unaudited) $ 16,983

Balance at September 30, 2021 $ ( 23 )

Net OCI changes 8,478

Balance at March 31, 2022 (unaudited) $ 6,880

Balance at June 30, 2022 (unaudited) $ 8,455

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

For the Three Months Ended March 31,

For the Three Months Ended June 30,

Interest (benefit) expense $ ( 2,377 ) $ 55

2 unchanged sentences

Total reclassifications from AOCI to earnings $ ( 1,759 ) $ 41

For the Six Months Ended March 31,

For the Nine Months Ended June 30,

Interest (benefit) expense $ ( 5,719 ) $ 691

4 unchanged sentences

South Carolina Acquisition

On April 3, 2023, a subsidiary of the Company acquired substantially all of the assets of Pickens Construction, Inc., an asphalt paving company headquartered in Anderson, South Carolina, for $ 4.8 million.

The transaction added an HMA plant and expanded the Company’s service market in the greater Greenville, South Carolina metro area.

Alabama Acquisition

On May 1, 2023, a subsidiary of the Company acquired certain assets comprising the Huntsville, Alabama operations of Southern Site Contractors, a Tennessee-based excavation, grading and utilities contractor, for $ 1.1 million.

The transaction added skilled employees and construction equipment to drive growth in northeast Alabama.

Restricted Stock Award

On May 4, 2023, the Company awarded a total of 29,614 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.

Award of PSUs

On May 4, 2023, the Company awarded PSUs that, if the target metrics for such PSUs are met, would result in the issuance of 8,052 shares of Class A common stock to certain members of Company management.

The grants are classified as equity awards.

Amendment to Management Services Agreement

On May 4, 2023, the Company and entered into an amendment (the “Amendment”) to the Management Services Agreement between the Company and SunTx that extends the end of the term thereof from October 1, 2023 to October 1, 2028.

For more information about the Amendment, see the discussion under Part II, Item 5 included elsewhere in this report.

Chief Financial Officer Employment Agreement

On May 4, 2023, the Company entered into an employment agreement with Gregory A.

Hoffman, the Company’s Senior Vice President and Chief Financial Officer.

For more information about the Employment Agreement, see the discussion under Part II, Item 5 included elsewhere in this report.

On August 1, 2023, a subsidiary of the Company acquired an HMA plant, together with the related inventory and certain equipment, of C.R.

Jackson, Inc., an asphalt paving company headquartered in Myrtle Beach, South Carolina, for $ 9.5 million.

The transaction added an HMA plant and expanded the Company’s service market in the greater Myrtle Beach, South Carolina metro area.

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

What changed 10-Q

Item 1. Financial Statements