What changed in this filing

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Item 1. Financial Statements

2024-02-09 compared with 2023-08-08 · 230 added, 262 removed, 500 unchanged (50% of the section changed)

3 unchanged sentences

(in thousands, except share data)

June 30, September 30,

ASSETS (unaudited)

December 31, September 30,

Current assets:

29 unchanged sentences

Total liabilities 754,991 703,091

Commitments and contingencies

Stockholders’ equity:

Preferred stock, par value $ 0.001 ;

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

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

Class A common stock, par value $ 0.001 ;

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

400,000,000 shares authorized, 43,896,017 shares issued and 43,828,855 shares outstanding at December 31, 2023, and 43,760,546 shares issued and 43,727,680 shares outstanding at September 30, 2023

Class B common stock, par value $ 0.001 ;

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

100,000,000 shares authorized, 11,921,463 shares issued and 8,998,511 shares outstanding at December 31, 2023 and September 30, 2023

Additional paid-in capital 270,113 267,330

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

Treasury stock, Class A common stock, par value $ 0.001 , at cost, 67,162 shares of Class A common stock at December 31, 2023 and 32,866 shares of Class A common stock at September 30, 2023

( 1,514 ) ( 178 )

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

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

( 15,603 ) ( 15,603 )

7 unchanged sentences

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

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

2023 2022 2023 2022

For the Three Months Ended December 31,

Revenues $ 396,505 $ 341,779

2 unchanged sentences

General and administrative expenses ( 35,981 ) ( 29,725 )

Gain on sale of property, plant and equipment 1,499 333 4,825 1,788

Gain on sale of property, plant and equipment, net 836 168

Gain on facility exchange — 5,389

1 unchanged sentence

Interest expense, net ( 3,746 ) ( 3,960 )

Other income 493 178 925 337

Other (expense) income ( 28 ) 34

Income before provision for income taxes 12,961 2,402

1 unchanged sentence

Net income 9,843 1,892

Other comprehensive income (loss), net of tax

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

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

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

Other comprehensive loss, net of tax

Unrealized loss on interest rate swap contract, net ( 7,105 ) ( 1,292 )

Unrealized gain on restricted investments, net 400 36

Other comprehensive loss ( 6,705 ) ( 1,256 )

Comprehensive income $ 3,138 $ 636

9 unchanged sentences

(unaudited in thousands, except share data)

For the Nine Months Ended June 30, 2023

For the Three Months Ended December 31, 2023

Class A Common Stock Class B Common Stock Additional

5 unchanged sentences

Net income — — — — — — — 9,843 — 9,843

Equity-based compensation expense — — — — 2,480 — — — — 2,480

Issuance of stock awards 180,798 — — — — — — — — —

Share-based compensation expense — — — — 2,783 — — — — 2,783

Issuance of stock grant awards 135,471 — — — — — — — — —

Purchase of treasury stock — — — — — ( 1,336 ) — — — ( 1,336 )

1 unchanged sentence

December 31, 2023 43,896,017 $ 44 11,921,463 $ 12 $ 270,113 $ ( 1,514 ) $ ( 15,603 ) $ 256,118 $ 11,989 $ 521,159

Net loss — — — — — — — ( 5,481 ) — ( 5,481 )

Equity-based compensation expense — — — — 2,692 — — — — 2,692

Other comprehensive loss — — — — — — — — ( 3,379 ) ( 3,379 )

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

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

For the Three Months Ended December 31, 2022

Class A Common Stock Class B Common Stock Additional

Capital Treasury

Stock Class A Common Stock Treasury

Stock Class B Common Stock Retained

Earnings Accumulated Other Comprehensive Income (Loss), net Total

Stockholders’

Stock Class A Common Stock

Stock Class B Common Stock

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

Shares Amount Shares Amount

1 unchanged sentence

Net income — — — — — — — 1,892 — 1,892

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

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

Share-based compensation expense — — — — 2,480 — — — — 2,480

Issuance of stock grant awards 180,798 — — — — — — — — —

Purchase of treasury stock — — — — — ( 139 ) — — — ( 139 )

Other comprehensive income — — — — — — — — 1,445 1,445

Conversion of Class B common stock to Class A common stock 4,338,924 4 ( 4,338,924 ) ( 4 ) — — — — — —

Other comprehensive (loss) — — — — — — — — ( 1,256 ) ( 1,256 )

December 31, 2022 41,376,528 $ 41 14,275,867 $ 15 $ 259,051 $ ( 178 ) $ ( 15,603 ) $ 199,166 $ 16,364 $ 458,856

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

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

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

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

March 31, 2022 41,193,222 $ 41 14,275,867 $ 15 $ 251,817 $ ( 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 Nine Months Ended June 30,

For the Three Months Ended December 31,

Cash flows from operating activities:

Net income $ 9,843 $ 1,892

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

Amortization of deferred debt issuance costs and debt discount 225 198

Unrealized loss (gain) on derivative instruments 1,408 ( 2,589 )

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

Depreciation, depletion, accretion and amortization 21,121 18,375

Amortization of deferred debt issuance costs 74 77

Unrealized loss on derivative instruments 226 1,007

Provision for bad debt 281 40

1 unchanged sentence

Gain on facility exchange — ( 5,389 )

Realized losses on restricted investments 10 —

Equity-based compensation expense 7,909 5,094

Realized loss on sales, calls and maturities of restricted investments 23 1

Share-based compensation expense 2,889 2,480

Deferred income tax benefit ( 404 ) ( 302 )

Other non-cash adjustments ( 86 ) ( 55 )

Changes in operating assets and liabilities, net of acquisition:

Contracts receivable including retainage 22,777 ( 71,865 )

Changes in operating assets and liabilities, net of business acquisitions:

Contracts receivable including retainage, net 63,507 47,072

Costs and estimated earnings in excess of billings on uncompleted contracts ( 2,203 ) ( 2,498 )

6 unchanged sentences

Other long-term liabilities 1,162 1,404

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

Net cash provided by operating activities, net of business acquisitions 60,378 28,884

Cash flows from investing activities:

2 unchanged sentences

Proceeds from facility exchange — 36,422

Proceeds from restricted investments 1,403 —

Proceeds from sales, calls and maturities of restricted investments 1,013 170

Business acquisitions, net of cash acquired ( 81,351 ) ( 77,206 )

Purchase of restricted investments ( 7,882 ) ( 7,662 )

Net cash used in investing activities ( 104,661 ) ( 70,670 )

Cash flows from financing activities:

Net proceeds from revolving credit facility 38,000 142,300

Proceeds from issuance of long-term debt, net of debt issuance costs and discount 15,000 —

Proceeds from revolving credit facility 90,000 53,000

Repayments of long-term debt ( 23,750 ) ( 3,125 )

7 unchanged sentences

Cash paid for interest $ 4,692 $ 4,064

Cash paid for income taxes $ 1,021 $ 1,372

Operating lease right-of-use assets obtained in exchange for operating lease liabilities $ 5,417 $ 6,209

Cash paid for operating lease liabilities $ 884 $ 734

Non-cash items:

Property, plant and equipment included with accounts payable at period end $ 2,078 $ 1,236

Amounts payable to seller in business combination $ — $ 600

Operating lease right-of-use assets obtained in exchange for operating lease liabilities $ 4,698 $ 4,361

Property, plant and equipment financed with accounts payable $ 7,088 $ 4,953

See notes to consolidated financial statements (unaudited).

6 unchanged sentences

The Company’s primary operations consist of (i) manufacturing and distributing hot mix asphalt (“HMA”) for both internal use and sales to third parties in connection with construction projects, (ii) paving activities, including the construction of roadway base layers and application of asphalt pavement, (iii) site development, including the installation of utility and drainage systems, (iv) mining aggregates, such as sand, gravel and construction stone, that are used as raw materials in the production of HMA and for sales to third parties, and (v) distributing liquid asphalt cement for both internal use and sales to third parties in connection with HMA production.

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 and family members, has owned a controlling interest in the Company’s stock since the Company’s inception.

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

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

The Company’s products are used, and its construction operations and production facilities are located, outdoors.

Therefore, seasonal changes and other weather-related conditions, in particular, extended snowy, rainy or cold weather in the winter, spring or fall and major weather events, such as hurricanes, tornadoes, tropical storms and heavy snows, can adversely affect the Company’s business and operations through a decline in both the use of the Company’s products and demand for the Company’s services.

Therefore, seasonal changes and other weather-related conditions, such as snowy, rainy or cold weather in the winter, spring or fall and major weather events, such as hurricanes, tornadoes, tropical storms and heavy snows, can adversely affect the Company’s business and operations through a decline in both the use of the Company’s products and demand for the Company’s services.

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

11 unchanged sentences

Management’s Estimates

The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the recorded amounts of assets, liabilities, stockholders’ equity, revenues and expenses during the reporting period, and the disclosure of contingent liabilities at the date of the consolidated financial statements.

Estimates are used in accounting for items such as recognition of revenues and cost of revenues, investments, mineral reserves, goodwill and other intangible assets, business acquisitions, 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, valuation of derivative instruments and valuation of equity-based compensation awards.

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 continually evaluated based on historical information and actual experience;

4 unchanged sentences

Cash consists principally of currency on hand and demand deposits at commercial banks.

Cash equivalents are short-term, highly liquid investments that are both readily convertible to known amounts of cash and are so near their maturity that they present insignificant risk of changes in value because of changes in interest rates.

Cash equivalents include investments with original maturities of three months or less.

Cash equivalents are short-term, highly liquid securities that are both readily convertible to known amounts of cash and are so near their maturity that they present insignificant risk of changes in value because of changes in interest rates.

Cash equivalents include securities with original maturities of three months or less.

The Company maintains demand accounts, money market accounts and certificates of deposit at several banks.

5 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 June 30, 2023 and at September 30, 2022.

The Company had restricted cash of $ 1.0 million and $ 0.8 million at December 31, 2023 and September 30, 2023, 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.

The Company’s restricted investments consist of debt securities held in a fiduciary capacity by the Captive for the payment of casualty insurance claims.

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

3 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, net.

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 and the Company’s intent to reinvest sales proceeds into new restricted investments.

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

The Company had restricted investments of $ 14.6 million and $ 15.1 million at December 31, 2023 and September 30, 2023, 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.

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 intends to sell, or that 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 (Loss).

When the Company has determined that it intends to sell, or that 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 for which the Company has determined that a credit loss exists, the present value of cash flows expected to be collected from the security is 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 by which the fair value is less than the amortized cost basis.

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

For the three months ended December 31, 2023 and 2022, the Company had no intent impairments or 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.” 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.

3 unchanged sentences

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.

The contract asset, “Costs and estimated earnings in excess of billings on uncompleted contracts”, arises when the Company recognizes revenues for services performed under its construction projects, but the Company is not yet entitled to bill the customer under the terms of the contract.

Amounts billed to customers are excluded from this asset and reflected on the Consolidated Balance Sheets as “Contracts receivable including retainage, net.” Included in costs and estimated earnings in excess of billings on uncompleted contracts are amounts the Company seeks or will seek to collect from customers or others for (i) errors, (ii) changes in contract specifications or design, (iii) contract change orders in dispute, unapproved as to scope and price, or (iv) other customer-related causes of unanticipated additional contract costs (such as claims).

Amounts billed to customers are excluded from this asset and reflected on the Consolidated Balance Sheets as “Contracts receivable including retainage, net”.

Included in costs and estimated earnings on uncompleted contracts are amounts the Company seeks or will seek to collect from customers or others for (i) errors, (ii) changes in contract specifications or design, (iii) contract change orders in dispute, unapproved as to scope and price, or (iv) other customer-related causes of unanticipated additional contract costs (such as claims).

Such amounts are recorded to the extent that the amount can be reasonably estimated and recovery is probable.

13 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 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 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 %

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

Projects performed for various departments of transportation accounted for 37.7 % and 33.7 % of consolidated revenues for the three months ended December 31, 2023 and 2022, respectively.

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

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

Florida Department of Transportation 12.6 % *

North Carolina Department of Transportation * 10.9 %

* Less than 10%

4 unchanged sentences

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

% of Consolidated Revenues

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

2023 2022 2023 2022

Private 36.8 % 36.6 % 39.0 % 38.8 %

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

Public 59.8 % 61.2 %

Private 40.2 % 38.8 %

Revenues derived from construction projects are recognized over time as the Company satisfies its performance obligations by transferring control of the asset created or enhanced by the project to the customer.

23 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.

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.

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.

Change orders are modifications of an original contract that effectively change the existing provisions of the contract and become part of the single performance obligation that is partially satisfied at the date of the contract modification.

26 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 June 30, 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 June 30, 2023 and September 30, 2022.

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

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 June 30, 2023 and September 30, 2022.

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

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

11 unchanged sentences

Comprehensive income comprises two subsets:

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

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

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

Note 3 - Accounting Standards

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

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

Note 4 - Business Acquisitions

Tennessee Acquisition - Provisional

On November 18, 2022, the Company acquired three HMA manufacturing plants and certain related assets located in the Nashville, Tennessee metro area for $ 9.5 million.

In connection with this transaction, the Company disposed of a quarry in North Carolina, resulting in total cash proceeds of $ 37.0 million and a gain on the facility exchange of $ 5.4 million.

North Carolina Acquisition - Provisional

On December 1, 2022, the Company acquired all of the capital stock of Ferebee Corporation, an HMA manufacturing and paving company headquartered in Charlotte, North Carolina for $ 67.3 million.

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.

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

Acquisitions - Provisional

On October 2, 2023, the Company acquired substantially all of the assets of Hubbard Paving & Grading, Inc., an asphalt and paving company headquartered in Walhalla, South Carolina, for $ 3.0 million.

This transaction added an HMA plant and expanded the Company’s service market in the Upstate region of South Carolina.

On November 1, 2023, the Company acquired three HMA plants and certain related assets from Reeves Construction Company for $ 18.3 million.

This transaction added HMA plants in Concord, North Carolina and Rock Hill and McConnells, South Carolina.

On December 29, 2023, the Company acquired all issued and outstanding membership interest of SJ&L General Contractor, LLC, an HMA and sitework company headquartered in Huntsville, Alabama, for $ 60.1 million.

This transaction expanded the Company’s service capabilities in the Huntsville, Alabama metro area.

The total amount of consideration for these transactions remains subject to post-closing adjustments with respect to inventory quantities, settlement of working capital and other matters.

Combined Acquisitions During the Three Months Ended December 31, 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 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.

As of December 31, 2023, the purchase price allocation had 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.

The Company expects to finalize these values as soon as practicable and no later than one year from their respective acquisition dates.

The Company expects to finalize the estimate of fair values as soon as practicable and no later than one year from their respective acquisition dates.

Identifiable assets acquired and liabilities assumed were recorded at their estimated fair values based on the methodology described

8 unchanged sentences

reduce the provisional amount allocated to goodwill.

Total consideration transferred for these acquisitions was $ 82.9 million, which was paid from available cash, proceeds from the exchange of the North Carolina facility and a draw from the Revolving Credit Facility (as defined in Note 8 - Debt).

The total consideration has been provisionally allocated as follows:

$ 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 June 30,

Pro forma revenues $ 422,438 $ 407,264

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

For the Nine Months Ended June 30,

Total consideration transferred for these acquisitions was $ 81.4 million, which was paid from available cash and a draw from the Revolving Credit Facility (as defined in Note 8 - Debt).

The combined total consideration has been provisionally allocated as follows:

$ 15.7 million of net working capital, $ 47.8 million of property, plant and equipment and $ 17.9 million of goodwill and intangibles.

The Consolidated Statements of Comprehensive Income include $ 4.7 million of revenue and $ 0.3 million of net loss attributable to the operations of these acquisitions for the period from the respective acquisition dates through December 31, 2023.

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 $ 0.5 million for the three months ended December 31, 2023.

The following table presents pro forma revenues and net income as though the acquisitions had occurred on October 1, 2022 (unaudited, in thousands):

For the Three Months Ended December 31,

Pro forma revenues $ 412,254 $ 362,244

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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, 2022, 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 nine months ended June 30, 2023 and 2022;

(a) include the pro forma results of operations of the acquisitions for the three months ended December 31, 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, 2022 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 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 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.

(c) include interest expense under the Revolving Credit Facility as if the funds borrowed to finance the purchase prices were borrowed on October 1, 2022 (interest expense calculations further assume that no principal payments were made during the period from October 1, 2022 through December 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, 2022 through December 31, 2023);

(d) exclude $ 0.5 million of acquisition-related expenses from the three months ended December 31, 2023, as though such expenses were incurred prior to the pro forma acquisition date of October 1, 2022.

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

Provisional Accounting

In April 2023, the Company acquired an HMA paving company headquartered in Anderson, South Carolina.

In May 2023, the Company acquired an excavation, grading and utility company headquartered in Huntsville, Alabama.

As of December 31, 2023, there had been no material adjustments to the September 30, 2023 provisional accounting for either acquisition as reported in the 2023 Form 10-K.

Note 5 - Contracts Receivable Including Retainage, Net

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 including retainage, net consisted of the following at December 31, 2023 and September 30, 2023 (in thousands):

December 31, 2023 September 30, 2023

Contracts receivable $ 202,386 $ 251,324

Retainage 47,285 44,253

Retainage receivable 54,308 53,286

256,694 304,610

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Contracts receivable including retainage, net $ 255,529 $ 303,704

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

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

Note 6 - Contract Assets and Liabilities

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

December 31, 2023 September 30, 2023

Costs on uncompleted contracts $ 1,731,342 $ 1,831,106

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Net billings in excess of costs and estimated earnings on uncompleted contracts $ ( 58,210 ) $ ( 51,609 )

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 June 30, 2023 are presented below (in thousands):

Costs and Estimated Earnings in Excess of Billings on

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Changes in revenue billed, contract price or cost estimates $ 3,124 $ ( 4,670 ) $ ( 1,546 )

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

December 31, 2022 (unaudited) $ 32,395 $ ( 57,147 ) $ ( 24,752 )

September 30, 2023 $ 27,296 $ ( 78,905 ) $ ( 51,609 )

Changes in revenue billed, contract price or cost estimates $ 3,143 $ ( 9,744 ) $ ( 6,601 )

December 31, 2023 (unaudited) $ 30,439 $ ( 88,649 ) $ ( 58,210 )

At December 31, 2023, the Company had unsatisfied or partially unsatisfied performance obligations under construction project contracts representing approximately $ 1.29 billion in aggregate transaction price.

The Company expects to earn revenue as it satisfies its performance obligations under such contracts in the amount of approximately $ 874.7 million during the remainder of the fiscal year ending September 30, 2024 and $ 411.5 million thereafter.

Note 7 - Property, Plant and Equipment

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

June 30, 2023 September 30, 2022

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

December 31, 2023 September 30, 2023

Construction equipment $ 499,339 $ 447,467

Plants 225,125 208,708

Mineral reserves 69,405 91,992

Land and improvements 78,275 76,396

Mineral reserves 69,405 69,405

Buildings 36,885 36,885

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Total property, plant and equipment, net $ 561,661 $ 505,095

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.

Depreciation, depletion, and amortization expense related to property, plant and equipment for the three months ended December 31, 2023 and 2022 was $ 21.0 million and $ 19.3 million, 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 June 30, 2023 and September 30, 2022 consisted of the following (in thousands):

June 30, 2023 September 30, 2022

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

December 31, 2023 September 30, 2023

Long-term debt:

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Current maturities of long-term debt ( 15,000 ) ( 15,000 )

Long-term debt, net of current maturities $ 405,416 $ 363,066

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.

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.

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”).

Long-term debt, net of current maturities and deferred debt issuance costs $ 427,064 $ 360,740

The Company and each of its subsidiaries are parties to a Third Amended and Restated Credit Agreement, dated June 30, 2022 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 on 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.

The Term Loan (commencing on September 30, 2022) and the Delayed Draw Term Loan (commencing on December 31, 2023), 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 on each of the following eleven quarter-end payment dates;

(b) 1.875 % of the original principal amount on each of the next eight quarter-end payment dates;

and (c) all remaining principal 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 %, 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 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.

At December 31, 2023 and September 30, 2023, there was $ 280.0 million and $ 283.8 million, respectively, of principal outstanding under the Term Loan, $ 163.1 million and $ 93.1 million, respectively, of principal outstanding under the Revolving Credit Facility, and availability of $ 153.6 million and $ 222.1 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

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

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.

At December 31, 2023 and September 30, 2023, the Company’s fixed charge coverage ratio was 3.35 -to-1.00 and 2.56 -to-1.00, respectively, and the Company’s consolidated leverage ratio was 1.78 -to-1.00 and 1.72 -to-1.00, respectively.

At both December 31, 2023 and September 30, 2023, 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 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.

both December 31, 2023 and September 30, 2023, the aggregate notional value of these interest rate swap agreements was $ 300.0 million, and the fair value was $ 17.6 million and $ 26.9 million, respectively, which is included within other assets on the Company’s Consolidated Balance Sheets.

Note 9 - Equity

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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 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.

During the three months ended December 31, 2023, the Company received a total of 33,772 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 524 shares of Class A common stock through forfeitures of restricted stock awards by terminated employees.

Restricted Stock Awards

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.

During the three months ended December 31, 2023, the Company awarded a total of 80,113 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”).

Additional information about these transactions is set forth in Note 13 - Equity-Based Compensation.

Performance Stock Units

During the three months ended December 31, 2023, the Company issued a total of 55,358 shares of Class A common stock in settlement of vested performance stock units ("PSUs") under the Equity Incentive Plan.

Additional information about these transactions is set forth in Note 13 - Share-Based Compensation.

Note 10 - Earnings Per Share

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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 June 30, For the Nine Months Ended June 30,

2023 2022 2023 2022

For the Three Months Ended December 31,

Net income attributable to common stockholders $ 9,843 $ 1,892

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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 June 30, For the Nine Months Ended June 30,

2023 2022 2023 2022

For the Three Months Ended December 31,

Net income attributable to common stockholders $ 9,843 $ 1,892

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Weighted average number of diluted common shares outstanding:

52,430,864 52,120,584

Net income per diluted common share attributable to common stockholders $ 0.19 $ 0.04

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

The Company’s effective income tax rate for the three months ended 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 Company’s effective income tax rate for the three months ended December 31, 2023 and 2022 was 24.1 % and 21.2 %, respectively.

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

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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 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.

At December 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.

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 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.

At December 31, 2023, $ 0.1 million and $ 0.1 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.

Remaining principal and interest payments are scheduled to be made in periodic installments during fiscal year 2024 through fiscal year 2026.

Prior to its acquisition by the Company, a current subsidiary of the Company advanced funds to an entity owned by an immediate family member of an officer of the Company in connection with a land development project.

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

• The Company is party to a management services agreement with SunTx, under which the Company pays SunTx Capital Management Corp.

(“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 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,

• The Company is party to a management services agreement with SunTx Capital Partners, a private equity firm based in Dallas, Texas and a member of the Company’s controlling group ("SunTx"), under which the Company pays SunTx $ 0.30 million per fiscal quarter and reimburses certain travel and other out-of-pocket expenses associated with services rendered under the management services agreement.

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

Revenue Earned (Expense Incurred) Accounts Receivable (Payable)

For the Three Months Ended December 31, December 31, September 30,

2023 2022 2023 2023

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

(unaudited) (unaudited) (unaudited)

Purchaser of Subsidiary $ — $ — $ 311 $ 311

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Subcontracting Services ( 1,913 ) (1)

( 1,819 ) (1)

( 387 ) ( 593 )

Island Pond ( 100 ) (2)

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

Note 13 - Equity-Based Compensation

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

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

Restricted Stock

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

Performance stock units (“PSUs”) are eligible to vest at the end of the performance period based on achievement of certain performance metrics established by the Compensation Committee of the Company’s Board of Directors (the “Compensation Committee”).

The preliminary number of shares of common stock issuable upon vesting of PSUs can range from 0 % to 150 % of the number of shares subject to the award, depending on the level of achievement, as determined by the Compensation Committee.

The preliminary number of vested shares may be increased or decreased by up to 15 % based on a comparison of the Company’s total shareholder return over the performance period to that of the Russell 2000.

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 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 13 - Share-Based Compensation

The following table summarizes the components of share-based compensation expense included in general and administrative expenses in the Consolidated Statements of Comprehensive Income during the three months ended December 31, 2023 and 2022 (in thousands):

For the Three Months Ended December 31,

(unaudited) (unaudited)

Equity classified awards $ 2,783 $ 2,480

Liability classified awards 106 —

Employee stock purchase plan 157 —

Total share-based compensation expense $ 3,046 $ 2,480

Restricted Stock - Equity Classified Awards

During the quarter ended December 31, 2023, the Company awarded a total of 80,113 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 $ 3.5 million.

During the quarter ended December 31, 2023, the Company recorded compensation expense in connection with these and prior restricted stock grants in the amount of $ 2.4 million, which is reflected as general and administrative expenses in the Company’s Consolidated Statements of Comprehensive Income.

At December 30, 2023, there was approximately $ 10.9 million of unrecognized compensation expense related to these awards, which will be recognized over a remaining weighted-average period of 2.8 years.

Performance Stock Units - Equity Classified Awards

PSUs provide for the issuance of shares of Class A 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 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.

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 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 quarter ended December 31, 2023, the Company issued 55,358 shares of Class A common stock as a result of the vesting of PSUs granted to certain members of Company management on December 29, 2021.

During the quarter ended December 31, 2023, the Company awarded PSUs representing a target of 83,044 shares and forecasted vesting of 62,283 shares of Class A common stock to certain members of Company management.

The grants are classified as equity awards.

The aggregate grant date fair value of these awards was $ 2.7 million.

During the quarter ended December 31, 2023, the Company recorded compensation expense in connection with these type awards in the amount of $ 0.4 million, which is reflected as general and administrative expenses in the Company’s Consolidated Statements of Comprehensive Income.

At December 31, 2023, there was approximately $ 4.4 million of unrecognized compensation expense related to these awards, which will be recognized over a remaining weighted-average period of 2.5 years.

Cash-Settled Restricted Stock Units - Liability Classified Awards

During the three months ended December 31, 2023, the Company granted 114,264 of cash-settled restricted stock units ("RSUs") to members of Company management under the Equity Incentive Plan.

The aggregate grant date fair value of these awards was $ 5.1 million.

Compensation expense associated with these awards for the three months ended December 31, 2023 and 2022 was $ 0.1 million and $ 0.0 million , respectively, and is included in general and administrative expenses in the Consolidated Statements of Comprehensive Income.

As of December 31, 2023 and September 30, 2023, the liability for cash-settled RSUs was $ 0.1 million and $ 0.0 million and is included in accrued expenses and other current liabilities and other long-term liabilities.

At December 31, 2023, there was approximately $ 5.0 million of unrecognized compensation expense related to these awards, which will be recognized over a remaining weighted-average period of 3.8 years.

The grant date fair value of these awards is based on the price of the Company’s Class A common stock and the number of shares awarded on the date of grant.

The award must be settled in cash and is accounted for as a liability-type award.

The expense is recognized over the requisite service period with remeasurement at the end of each reporting period at fair value until settlement.

The requisite service period is based on the vesting provisions of the awards which generally occurs in four equal annual installments beginning on the date of the first fiscal year-end after the grant date.

Employee Stock Purchase Plan

The Construction Partners, Inc.

Employee Stock Purchase Plan (the ESPP) became effective on May 13, 2021.

The ESPP is intended to provide eligible employees of the Company an opportunity to purchase shares of the Company’s Class A common stock at a discounted rate using funds withheld through payroll deductions.

The maximum number of Shares that will be offered under the ESPP is 1,000,000 .

The first offering period under the ESPP commenced on July 1, 2023.

Since that date, the Company has purchased 20,619 shares under the ESPP.

Compensation expense associated with the ESPP for the three months ended December 31, 2023 and 2022 was $ 0.2 million and $ 0.0 million , respectively, and is included in in general and administrative expenses in the Consolidated Statements of Comprehensive Income.

Note 14 - Leases

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

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.

As of December 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 $ 18.4 million, $ 3.5 million and $ 15.5 million, respectively.

As of December 31, 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 June 30,

Operating lease cost $ 817 $ 650

Short-term lease cost 5,551 5,698

Total lease expense $ 6,368 $ 6,348

For the Nine Months Ended June 30,

Operating lease cost $ 2,331 $ 1,884

Short-term lease cost 16,319 13,905

For the Three Months Ended December 31,

Operating lease expense $ 903 $ 726

Short-term lease expense 5,376 6,035

Total lease expense $ 6,279 $ 6,761

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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 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):

As of December 31, 2023, the weighted-average remaining term of the Company’s leases was 7.2 years, and the weighted-average discount rate was 3.62 %.

As of December 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 December 31, 2023 (unaudited, in thousands):

Fiscal Year Amount

27 unchanged sentences

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 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)

Change in Change in

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

Cost of revenues $ ( 970 ) $ 878 $ ( 92 ) $ 1,349 $ 143 $ 1,492

Interest expense, net 2,377 — 2,377 ( 121 ) 316 195

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

For the Nine Months Ended June 30,

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

For the Three Months Ended December 31,

(unaudited) (unaudited)

4 unchanged sentences

Total $ 2,619 $ ( 226 ) $ 2,393 $ 1,936 $ ( 1,007 ) $ 929

June 30, 2023 September 30, 2022

December 31, 2023 September 30, 2023

Balance Sheet Classification (unaudited)

Prepaid expenses and other current assets - commodity swaps $ — $ 204

Other assets - commodity swaps — 155

Other assets - interest rate swaps (1)

1 unchanged sentence

Accrued expense and other current liabilities - commodity swaps ( 42 ) ( 20 )

Other long-term liabilities - commodity swaps — ( 60 )

Net unrealized gain position $ 17,553 $ 27,093

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

(1) Includes designated cash flow hedge of $ 17.6 million and $ 26.9 million as of December 31, 2023 and September 30, 2023, respectively.

Note 16 - Fair Value Measurements

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

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

December 31, 2023 September 30, 2023

Level 2 Level 2

Commodity swap contracts $ — $ 204

Interest rate swaps 24,478 24,719

Interest rate swap 17,595 26,909

Corporate debt securities 5,721 5,605

5 unchanged sentences

Total liabilities $ 42 $ 20

The fair value of interest rate swap contracts is based on a model-driven valuation using the observable components (e.g., interest rates), which are observable at commonly quoted intervals for the full term of the contracts.

The fair value of the interest rate swap contract is based on a model-driven valuation using the observable components (e.g., interest rates), which are observable at commonly quoted intervals for the full term of the contracts.

The fair value of the Company’s commodity swap contracts is based on an analysis of the expected cash flow of the contract in combination with observable forward price inputs obtained from a third-party pricing source.

1 unchanged sentence

Therefore, the Company’s derivative assets and liabilities are classified within Level 2 of the fair value hierarchy.

Derivative assets are included within “Prepaid expenses and other current assets” and “Other assets” on the Company’s Consolidated Balance Sheets.

Derivative assets are included within “Prepaid

expenses and other current assets” and “Other assets” on the Company’s Consolidated Balance Sheets.

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

2 unchanged sentences

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 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.

At December 31, 2023, the Company had aggregate letters of credit outstanding in the amount of $ 8.3 million, primarily related to certain insurance policies as described in Note 2 - Significant Accounting Policies.

Purchase Commitments

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.

As of December 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 $ 3.3 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 June 30, 2023, the Company’s purchase commitments annually thereafter were as follows (unaudited, in thousands):

As of December 31, 2023, the Company’s purchase commitments for the remainder of fiscal 2024 and in 2025 were as follows (unaudited, in thousands):

Fiscal Year Amount

6 unchanged sentences

however, certain agreements have minimum annual payments.

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):

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

Fiscal Year Amount

2 unchanged sentences

Total $ 2,525

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.

Royalty expense recorded in cost of revenue during the three months ended December 31, 2023 and 2022 was $ 0.4 million and $ 0.4 million, respectively.

Note 18 - Restricted Investments

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

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

December 31, 2023

Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value

6 unchanged sentences

Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value

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

government securities $ 6,869 $ — $ 320 $ 6,549

Corporate debt securities 5,931 — 326 5,605

Municipal government securities 1,853 — 105 1,748

Agency backed securities 862 — 69 793

Other debt securities 1,273 — 96 1,177

Total $ 15,926 $ — $ 847 $ 15,079

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):

The amortized cost and fair value of debt securities classified as available for sale by contractual maturity, as of December 31, 2023, are as follows (unaudited, in thousands):

Amortized Cost Fair Value

9 unchanged sentences

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 June 30, 2023 and September 30, 2022, were as follows (in thousands):

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

Amounts in accumulated other comprehensive income (“AOCI”), net of tax, at December 31, 2023 and September 30, 2023, were as follows (in thousands):

AOCI December 31, 2023 (unaudited) September 30, 2023

Interest rate swap contract, net of blend and extend arrangement $ 16,114 $ 25,533

Unrealized loss on available-for-sale securities ( 342 ) ( 847 )

Less net tax effect of other comprehensive income items ( 5,642 ) ( 5,575 )

Less tax effect of other comprehensive income (loss) items ( 3,783 ) ( 5,992 )

Total 11,989 18,694

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

AOCI Interest Rate Hedge

Balance at September 30, 2023 $ 18,694

Net OCI changes ( 6,705 )

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

Balance at December 31, 2023 (unaudited) $ 11,989

AOCI Interest Rate Hedge

Balance at September 30, 2022 $ 17,620

Net OCI changes ( 1,256 )

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

Balance at December 31, 2022 (unaudited) $ 16,364

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

For the Three Months Ended June 30,

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

Realized loss on restricted investments 6 —

Expense (benefit) from income taxes 612 ( 14 )

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

For the Nine Months Ended June 30,

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

Realized loss on restricted investments 10 —

Expense (benefit) from income taxes 1,473 ( 178 )

For the Three Months Ended December 31,

Interest expense (benefit) $ ( 2,638 ) $ ( 1,335 )

Benefit from income taxes 654 344

Total reclassifications from AOCI to earnings $ ( 1,984 ) $ ( 991 )

Note 20 - Subsequent Events

South Carolina Acquisition

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.

On January 2, 2024, the Company acquired substantially all of the assets of Littlefield Construction Company, a soil base, surface treatment and sitework company headquartered in Waycross, Georgia, for $ 6.4 million.

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

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