What changed in this filing

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Item 1. Business

2024-11-25 compared with 2023-11-29 · 57 added, 33 removed, 169 unchanged (35% of the section changed)

We are a civil infrastructure company that specializes in the construction and maintenance of roadways across Alabama, Florida, Georgia, North Carolina, South Carolina and Tennessee.

We are a civil infrastructure company that specializes in the construction and maintenance of roadways across Alabama, Florida, Georgia, North Carolina, South Carolina, Tennessee and Texas.

Through our wholly owned subsidiaries, we provide a variety of products and services to both public and private infrastructure projects, with an emphasis on highways, roads, bridges, airports, and commercial and residential developments.

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and its subsidiaries, except when the context requires that those terms mean only the parent company or a particular subsidiary.

2023 Fiscal Year Developments

• Acquisitions.

During the 2023 fiscal year, we completed five acquisitions across four states, adding to or expanding our operations in Alabama, North Carolina, South Carolina and Tennessee.

As a result of these acquisitions, we added eight asphalt plants and a diverse fleet of equipment and vehicles, as well as skilled construction professionals.

Recent Developments

• ROAD-Map 2027.

In October 2023, we publicly announced “ROAD-Map 2027,” a comprehensive business plan setting forth our strategic initiatives, growth priorities, and business outlook through fiscal year 2027.

ROAD-Map 2027 contemplates several revenue and growth goals, including, among others, revenues exceeding $3 billion by the end of fiscal year 2027.

• 2024 Fiscal Year Acquisitions.

During the 2024 fiscal year, we completed eight acquisitions across four states, adding to or expanding our operations in Alabama, Georgia, North Carolina and South Carolina.

As a result of these acquisitions, we added 11 asphalt plants and a diverse fleet of equipment and vehicles, as well as skilled construction professionals.

The total transaction consideration for these acquisitions was approximately $231.7 million.

We also 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.

For further discussion regarding these transactions, see Note 4 - Business Acquisitions to the consolidated financial statements included elsewhere in this report.

• Inflationary and Supply Chain Trends.

During the fiscal year ended September 30, 2023, we continued to experience an upward trend in certain inflation-sensitive inputs for our products and services, including upward pressure on wages and increases in the cost of raw materials used to produce HMA, such as liquid asphalt and aggregate materials.

We also experienced some disruptions from subcontractors, materials suppliers, equipment manufacturers and others in our supply chain, although to a lesser extent than in recent years.

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

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

• Lone Star Paving Acquisition .

On November 1, 2024, we acquired all of the outstanding membership units of Asphalt, Inc., LLC (doing business as Lone Star Paving) (“Lone Star Paving” and such acquisition, the “Lone Star Acquisition”), a vertically integrated asphalt manufacturing and paving company headquartered in Austin, Texas, with 10 HMA plants, four aggregate facilities, and one liquid asphalt terminal supporting its operations.

The aggregate consideration delivered at the closing of the Lone Star Acquisition consisted of (i) $654.2 million in cash (as adjusted pursuant to the Unit Purchase Agreement, dated as of October 20, 2024, by and among the Company, Lone Star Paving, the selling unit holders party thereto, and John J.

Wheeler, in his capacity as the selling unit holders’ representative thereunder) and (ii) 3.0 million shares of Class A common stock.

In addition, we agreed to (A) pay cash to the selling unit holders in an amount equal to the working capital remaining in Lone Star Paving at closing, as finally determined (subject to adjustments and offsets to satisfy certain indemnification obligations and any purchase price overpayments), to be paid out in quarterly installments over four quarters following the closing, and (B) purchase from the selling unit holders for $30.0 million in cash an entity that owns certain real property following receipt of specified operational entitlements by such entity.

The cash paid at closing was funded from the proceeds of the Term Loan B (as defined herein).

For more information about the Lone Star Acquisition, see Note 27 - Subsequent Events to the consolidated financial statements included elsewhere in this report.

• Term Loan B Credit Agreement.

On November 1, 2024, we entered into a Term Loan Credit Agreement with Bank of America, N.A., as administrative agent, BofA Securities, Inc., PNC Capital Markets LLC, Regions Capital Markets, a division of Regions Bank, and TD Securities (USA) LLC, each as joint lead arranger and joint bookrunner, and certain other lenders party thereto (the “Term Loan B Credit Agreement”).

The Term Loan B Credit Agreement provides for a senior secured first lien term loan facility in the aggregate principal amount of $850.0 million, which amount was fully drawn on November 1, 2024 (the “Term Loan B”).

A portion of the proceeds of the Term Loan B was used to finance the cash portion of the consideration for the Lone Star Acquisition, including the repayment of certain outstanding indebtedness of Lone Star Paving and its subsidiaries at closing.

The remaining loan proceeds were or will be used (i) to repay the Company’s outstanding borrowings under the revolving credit facility provided by the Term Loan A / Revolver Credit Agreement (as defined below), (ii) to pay fees and expenses incurred in connection with the foregoing debt financing transactions and Lone Star Acquisition and (iii) for working capital and other corporate purposes as permitted by the Term Loan B Credit Agreement.

For more information about the Term Loan B Credit Agreement, see Note 27 - Subsequent Events to the consolidated financial statements included elsewhere in this report.

• Credit Agreement Amendments.

In May 2024, we and certain of our wholly owned subsidiaries entered into a Third Amendment to our Third Amended and Restated Credit Agreement with PNC Bank, National Association, as administrative agent, and certain other lenders party from time to time thereto (as amended from time to time, the “Term Loan A / Revolver Credit Agreement”) to, among other things, (i) increase the aggregate commitments under the revolving credit facility from $325.0 million to $400.0 million, (ii) reallocate $125.0 million of borrowings previously outstanding under the revolving credit facility to our term loan, (iii) add three new banks to our lender syndicate, (iv) provide for an additional incremental credit facility of up to $200.0 million and (v) update certain affirmative and negative covenants thereunder.

Additionally, on October 30, 2024, we entered into a Fourth Amendment to the Term Loan A / Revolver Credit Agreement to, among other things, permit (i) the Lone Star Acquisition, (ii) entry into the Term Loan B Credit Agreement, and (iii) certain liens to be granted to secure the indebtedness incurred under the Term Loan B Credit Agreement on a pari passu basis with the liens securing the Company’s obligations under the Term Loan A / Revolver Credit Agreement.

For further discussion regarding the Term Loan A / Revolver Credit Agreement and the foregoing amendments, see Note 11 - Debt and Note 27 - Subsequent Events to the consolidated financial statements included elsewhere in this report.

• Stock Repurchase Program.

In April 2024, our board of directors authorized a stock repurchase program under which up to $40 million is available to purchase shares of our outstanding Class A common stock through September 30, 2025.

We utilize the stock repurchase program to minimize the dilutive impact of awards granted under our equity incentive plans and to repurchase shares opportunistically.

Shares of our Class A common stock may be repurchased from time to time in open market transactions at prevailing market prices, in privately negotiated transactions or by other means in accordance with federal securities laws, including Rule 10b5-1 plans.

The stock repurchase program does not obligate us to repurchase any shares of Class A common stock, and the stock repurchase program may be modified, suspended, extended or terminated at any time by our board of directors.

The actual timing, number and value of shares of Class A common stock repurchased are determined by a committee of the board of directors at its discretion and depend on a number of factors, including the market price of our Class A common stock, capital allocation alternatives, general market and economic conditions and other corporate considerations.

During fiscal 2024, we repurchased a total of 173,741 shares of Class A common stock for an aggregate purchase price of $10.0 million.

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

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Recent growth in our industry has been driven by federal, state and local Department of Transportation (“DOT”) budgets, which annually earmark amounts for transportation and infrastructure spending.

The federal Fixing America’s Surface Transportation Act (the “FAST Act”), which was signed into law in 2015, provided funding for surface transportation infrastructure through September 30, 2020, and a continuing resolution approved in October 2020 extended the FAST Act surface transportation programs by one year and added $13.6 billion to the federal Highway Trust Fund.

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

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

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

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

The non-discretionary nature of highway and road construction services and materials supports stable and consistent industry funding.

The Inflation Reduction Act of 2022 provides funding for numerous projects and initiatives relevant to the surface transportation industry, including grants for safety and environmental improvements, incentives for the use of construction materials and products with lower levels of embodied greenhouse gas emissions, and streamlined environmental review processes for proposed projects.

The Inflation Reduction Act of 2022 (the “Inflation Reduction Act”) provides funding for numerous projects and initiatives relevant to the surface transportation industry, including grants for safety and environmental improvements, incentives for the use of construction materials and products with lower levels of embodied greenhouse gas emissions, and streamlined environmental review processes for proposed projects.

Projects and Customers

We provide construction products and services to both public and private infrastructure projects, with an emphasis on highways, roads, bridges, airports, and commercial and residential sites in the southeastern United States.

We provide a wide range of large sitework construction, including site development, paving, and utility and drainage systems construction, and supply the HMA required for the projects.

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Our largest customers are state DOTs.

F or the fiscal year ended September 30, 2023, the Florida DOT and North Carolina DOT accounted for 10.7% and 10.5% of our revenues, respectively.

Other than the Florida DOT and North Carolina DOT, no other customer accounted for more than 10% of our revenues for the fiscal year ended September 30, 2023, and projects performed for all DOTs accounted for 36.2% of our revenues.

For the fiscal year ended September 30, 2024, the Florida DOT accounted for 13.6% of our revenues, and projects performed for all DOTs accounted for 40.7% of our revenues.

Other than the Florida DOT, no other customer accounted for more than 10% of our revenues for the fiscal year ended September 30, 2024.

Our 25 largest projects accounted for 15.7% of our revenues for the fiscal year ended September 30, 2024.

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We also occasionally enter into design-build contracts, which generally are performed under fixed total price contracts.

For the majority of our contracts, we receive our final payment upon completion and final acceptance of the services that we were contracted to perform and delivery of the necessary contract closing documents, and our obligations to the owner are complete at that point.

For the majority of our contracts, we receive our final payment when

contracts are near completion or fully completed.

For some contracts, we are required to furnish a warranty on our construction.

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Also, to mitigate the risk of material price changes, we obtain “not to exceed” quotations from our suppliers, which, for projects of longer duration, usually contain price escalator provisions.

These quotations typically include

quantity guarantees that are tied to our prime contract.

These quotations typically include quantity guarantees that are tied to our prime contract.

We have no obligation for materials or subcontract services beyond those required to complete the respective contracts that we are awarded for which quotations have been provided.

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Most of our contracts with governmental agencies provide for termination at the convenience of the customer, with requirements to pay us for work performed through the date of termination.

The termination of a government contract for the convenience of the customer is an extremely rare occurrence.

The termination of a government contract for the convenience of the customer

is an extremely rare occurrence.

Many of our contracts contain provisions that require us to pay liquidated damages if specified completion schedule requirements are not met.

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Historically, we have not experienced material amounts of contract cancellations or modifications.

Many projects are added to our contract backlog and completed within the same fiscal year and therefore may not be

reflected in our beginning or year-end contract backlog.

Many projects are added to our contract backlog and completed within the same fiscal year and therefore may not be reflected in our beginning or year-end contract backlog.

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

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Our competitors typically range from small, family-owned companies focused on a single material, product or market to multinational corporations that offer a wide array of construction materials, products and paving and related services.

Factors influencing our competitiveness include price, estimating abilities, knowledge of local markets and conditions, project management, financial strength, reputation for quality, aggregate materials availability and machinery and equipment.

availability and machinery and equipment.

We believe that we are well-positioned to compete effectively in the markets in which we operate.

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Our third fiscal quarter varies greatly with spring rains and wide temperature variations.

A cool, wet spring increases drying time on projects, which can delay revenue in the third fiscal quarter, while a warm, dry spring may facilitate earlier project commencement dates.

A cool, wet spring increases drying time on projects, which can delay revenue, while a warm, dry spring may facilitate earlier project commencement dates.

Sources and Availability of Raw Materials

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These laws and regulations impose numerous obligations and limitations on our operations, including:

• requirements to obtain a permit or other approval before conducting regulated activities;

• zoning and other requirements to obtain a permit or other approval before conducting regulated activities;

• restrictions on the types, quantities and concentration of materials that can be released into the environment;

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• the imposition of substantial liabilities for pollution resulting from our operations.

Such federal laws include (i) the Federal Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery Act, the Pollution Prevention Act and the Comprehensive Environmental Response, Compensation and Liability Act, governing solid and hazardous waste management, (ii) the Clean Air Act, the Clean Water Act and the Safe Drinking Water Act, protecting air and water resources, and (iii) the Emergency Planning and Community Right-to-Know Act and Toxic Substances Control Act, governing the management of hazardous materials, (iv) the federal Mine Safety and Health Act of 1977, requiring certain disclosures of mining-related health and safety violations, orders, citations, assessments, legal actions, and mining-related fatalities, and (v) the Occupational Safety and Health Act, governing working conditions for workers, in addition to analogous state laws.

Such federal laws include, but are not limited to, (i) the Federal Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery Act, the Pollution Prevention Act and the Comprehensive Environmental Response, Compensation and Liability Act, governing solid and hazardous waste management, (ii) the Clean Air Act, the Clean Water Act and the Safe Drinking Water Act, protecting air and water resources, and (iii) the Emergency Planning and Community Right-to-Know Act and Toxic Substances Control Act, governing the management of hazardous materials, (iv) the federal Mine Safety and Health Act of 1977, requiring certain disclosures of mining-related health and safety violations, orders, citations, assessments, legal actions, and mining-related fatalities, and (v) the Occupational Safety and Health Act, governing working conditions for workers, in addition to analogous state laws.

Numerous governmental authorities, such as the Environmental Protection Agency and corresponding state agencies, have the power to enforce compliance with these laws and regulations and the permits issued under them.

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

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

own actions that complied with applicable laws at the time those actions were taken.

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

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

New laws, regulations and changing interpretations by regulatory authorities may increase our future expenditures to comply with environmental requirements.

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

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During fiscal year 2024, the number of hourly employees ranged from 3,044 to 3,595 employees and averaged 3,256 employees.

As of November 20, 2024, after giving effect to the Lone Star Acquisition, we employed 1,484 salaried employees and 4,218 hourly employees.

We are not subject to any collective bargaining agreements with respect to any of our employees.

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Like others in our industry, we experience some recurring employee turnover;

however, we historically have been able to attract sufficient numbers of personnel to support the growth of our operations.

however, we have historically been able to attract sufficient numbers of personnel to support the growth of our operations.

Nonetheless, we continue to face competition for experienced workers in all of our markets.

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Website Information

The Company maintains a website at www.constructionpartners.net.

Certain corporate governance information, filings with the Securities and Exchange Commission (the “SEC”) and other information of potential interest to our stockholders are available free of charge through the “Investors” page of the Company’s website.

These include, for example, our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

We maintain a website at www.constructionpartners.net.

These include, for example, our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to such reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

These documents are made available as soon as reasonably practicable after they are filed with, or furnished to, the SEC.

Information on, or accessible through, the Company’s website is not part of or incorporated into this Annual Report on Form 10-K.

Information on, or accessible through, our website is not part of or incorporated into this Annual Report on Form 10-K.

We have included the website address only as an inactive textual reference and do not intend for it to be an active link to the website.

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

What changed 10-K

Item 1. Business