What changed in this filing

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Item 1A. Risk Factors

2024-11-25 compared with 2023-11-29 · 56 added, 53 removed, 397 unchanged (22% of the section changed)

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Risks Related to our Business

A significant slowdown or decline in economic conditions, particularly in the southeastern United States, could adversely impact our results of operations.

We currently operate in Alabama, Florida, Georgia, North Carolina, South Carolina and Tennessee.

A significant slowdown or decline in economic conditions, particularly in the southern United States, could adversely impact our results of operations.

We currently operate in Alabama, Florida, Georgia, North Carolina, South Carolina, Tennessee and Texas.

A significant slowdown or decline in economic conditions or uncertainty regarding the economic outlook in the United States generally, or in any of these states particularly, could reduce demand for infrastructure projects.

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

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

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

In November 2021, the IIJA was signed into law, which provided additional funding for highways, bridges and airports over a five-year period.

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

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

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Many states have experienced state-level funding pressures caused by lower tax revenues and an inability to finance approved projects.

To address these pressures, some states have adopted measures to promote stable funding for infrastructure investment, including special-purpose taxes and increased fuel taxes.

Any reduction in state infrastructure funding in the states in which we operate could have a material adverse effect on our results of operations.

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Our largest customers are state DOTs.

During the fiscal year ended September 30, 2023, the Florida DOT and the North Carolina DOT accounted for 10.7% and 10.5% of our revenues, respectively, and projects performed for all state DOTs accounted for 36.2% of our revenues.

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

Subsequent to the fiscal year ended September 30, 2024, we completed the Lone Star Acquisition.

The customers of Lone Star Paving include the Texas Department of Transportation (“TxDOT”), local municipalities, heavy civil contractors, and commercial and residential developers.

As result of the Lone Star Acquisition, we anticipate that TxDOT will be among our top five customers (based on revenues) in the fiscal year ending September 30, 2025.

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

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Government contracts typically can be canceled at any time, with us receiving payment only for the work completed.

The cancellation of an unfinished contract could result in lost revenues and cause our equipment to be idled for a significant period of time until other

comparable work becomes available.

The cancellation of an unfinished contract could result in lost revenues and cause our equipment to be idled for a significant period of time until other comparable work becomes available.

In addition, we could be prohibited from bidding on certain government contracts if we fail to maintain qualifications required by those entities.

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Inflation and supply chain disruptions have the potential to adversely affect our business, financial condition and results of operations, particularly if we are unable to pass through increased costs to our customers.

During the fiscal year ended September 30, 2023, we continued to experience an upward trend in several inflation-sensitive inputs that we use to provide our products and services,

including upward pressure on wages and increases in the cost of raw materials used to produce HMA and other items critical to our business, including fuel, concrete and steel.

In addition, we continued to experience disruptions from various participants in our supply chains, including subcontractors, materials suppliers and equipment manufacturers, who provide the raw materials, equipment, vehicles, construction supplies and other services we require in order to manufacture HMA and perform our construction projects.

While we have been able to mitigate some of the effects of inflation, supply chain disruptions and upward wage pressures on our business by increasing prices for our products and including the anticipated cost increases in the construction projects for which we bid, we may not be able to do so in the future.

In recent years, we experienced an upward trend in several inflation-sensitive inputs that we use to provide our products and services, including upward pressure on wages and increases in the cost of raw materials used to produce HMA and other items critical to our business, including fuel, concrete and steel.

We also experienced disruptions from various participants in our supply chains, including subcontractors, materials suppliers and equipment manufacturers, who provide the raw materials, equipment, vehicles, construction supplies and other services we require in order to manufacture HMA and perform our construction projects.

Although we have been able to mitigate some of the effects of inflation, supply chain disruptions and upward wage pressures on our business by increasing prices for our products and including the anticipated cost increases in the construction projects for which we bid, we may not be able to do so in the future.

In addition, we are limited in our ability to pass through increased costs for projects already in our backlog, and if we are unable to do so, we may not recoup our losses or diminished profit margins.

If inflation and supply chain disruptions continue to rise, we may be required to implement further price adjustments to maintain our profit margin, and any price increases may have a negative effect on demand.

If we experience significant inflation or supply chain disruptions going forward, we may be required to implement further price adjustments to maintain our profit margin, and any price increases may have a negative effect on demand.

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

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

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

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

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Since our inception, we have acquired and integrated 48 complementary businesses, which have contributed significantly to our growth.

We continue to evaluate strategic acquisition opportunities that have the potential to support and strengthen our business, including acquisitions in the southeastern United States, as part of our ongoing growth strategy.

We continue to evaluate strategic acquisition opportunities that have the potential to support and strengthen our business, including acquisitions in the southern United States, as part of our ongoing growth strategy.

We cannot predict the timing or size of any future acquisitions.

To successfully acquire a target, we may need to raise additional equity and/or incur additional indebtedness, which could increase our leverage level.

There can be no assurance that we will be able to identify and complete acquisition transactions on favorable terms, or at all.

We may be unable to identify and complete acquisition transactions on favorable terms, or at all.

The investigation of acquisition candidates and the negotiation, drafting and execution of relevant agreements, disclosure documents and other instruments require substantial management time and attention and costs for accountants, attorneys and others.

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• unforeseen expenses, complications and delays, including difficulties in employing sufficient staff and maintaining operational and management oversight.

In addition, potential acquisition targets may be in states in which we do not currently operate, which could result in unforeseen operating difficulties and difficulties in coordinating geographically dispersed operations, personnel and facilities and subject us to additional and unfamiliar legal requirements.

We cannot guarantee that we will achieve synergies and cost savings in connection with future acquisitions.

In addition, potential acquisition targets may be in states in which we do not currently operate.

For example, on November 1, 2024, we acquired Lone Star Paving in Texas, a geographic region in which the Company has not historically operated.

The Lone Star Acquisition or any future acquisition in a new geographic region could result in unforeseen operating challenges and difficulties in coordinating geographically dispersed operations, personnel and facilities and subject us to unfamiliar legal requirements.

We cannot guarantee that we will achieve synergies and cost savings in connection with recent and future acquisitions.

Many of the businesses that we previously acquired, and businesses that we may acquire in the future, could have unaudited financial statements that are prepared by management and are not independently reviewed or audited, and such financial statements could be materially different if they were independently reviewed or audited.

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

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

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

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

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

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

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

As a result, seasonal changes and adverse weather conditions, such as extended snowy, rainy or cold weather, can adversely affect our business operations through a decline in the use and production of HMA, a decline in the demand for our construction services, alterations and delays in our construction schedules, and reduced efficiencies in our contracting operations, resulting in under-utilization of crews and equipment and lower contract profitability.

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

For example, Hurricanes Debby, Francine and Helene all made landfall in the southeastern United States during our fourth fiscal quarter of 2024 and disrupted operations in various portions of our geographic footprint through flooding, extended power outages and road closures, among other issues.

These and similar seasonal changes and adverse weather conditions, such as extended snowy, rainy or cold weather, can adversely affect our business operations through a decline in the use and production of HMA, a decline in the demand for our construction services, alterations and delays in our construction schedules, extended power outages limiting the use of plants and equipment and reduced efficiencies in our contracting operations, resulting in under-utilization of crews and equipment and lower contract profitability.

Climate change may lead to increased extreme weather and changes in precipitation and temperature, including natural disasters.

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Any significant breach, breakdown, destruction or interruption of these systems has the potential to negatively affect our operations.

We could experience a business interruption, theft of information or reputational damage as a result of a cyber attack, such as the infiltration of a data center, or data leakage of confidential information either internally or through our third-party providers.

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

We could experience a business interruption, theft of information or reputational damage as a result of a cybersecurity attack, such as the infiltration of a data center, or data leakage of confidential information either internally or through our third-party providers.

Although we have invested in the protection of our data and information technology to reduce these risks and periodically test the security of our information systems network, our efforts may not prevent breakdowns or breaches in our systems that could have a material adverse effect on our financial condition, results of operations and liquidity.

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

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

Although we have not experienced a material cybersecurity incident or business interruption event to date, an interruption in the business operations of our suppliers and other third parties with which we do business resulting from a cybersecurity attack could indirectly impact our business operations.

Design-build contracts subject us to the risk of design errors and omissions.

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Environmental laws and regulations and any changes to, or liabilities arising under, such laws and regulations could have a material adverse effect on our financial condition, results of operations and liquidity.

Our operations are subject to stringent and complex federal, state and local laws and regulations governing the discharge of materials into the environment or otherwise relating to environmental protection and public health and safety.

Our operations are subject to stringent and complex federal, state and local laws and regulations governing the release of pollutants and materials into the environment or otherwise relating to environmental protection and public health and safety.

These laws and regulations impose numerous obligations applicable to our operations, including requirements to obtain a permit or other approval before conducting regulated activities;

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Numerous government authorities, such as the U.S.

Environmental Protection Agency (the “EPA”) and analogous state agencies, have the power to enforce compliance with these laws and the permits issued under them.

Environmental Protection Agency and analogous state agencies, have the power to enforce compliance with these laws and the permits issued under them.

Such enforcement actions often involve difficult and costly compliance measures or corrective actions.

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The trend of more expansive and stringent environmental legislation and regulations applied to our industry could continue, resulting in increased costs of doing business and, consequently, affecting profitability.

Additionally, legal requirements are changing frequently and are subject to interpretation.

New laws, regulations and changing interpretations by regulatory authorities may increase our future expenditures to comply with environmental requirements, which could adversely affect our business and results of operations.

Climate change and related laws and regulations could adversely affect us.

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Climate change could also lead to disruptions in our supply chain, thereby impairing our production capabilities, or the distribution of our products due to major storm events or prolonged adverse conditions, changing temperature levels or flooding from sea level changes, especially in our coastal markets.

These changes could be severe and could negatively impact demand for our products and services.

In addition, governmental initiatives to address climate change could, if

adopted, restrict our operations, require us to make capital or other expenditures to comply with these initiatives, increase our costs, impact our ability to compete or negatively impact efforts to obtain permits, licenses and other approvals for existing and new facilities.

These changes could be severe and

could negatively impact demand for our products and services.

In addition, governmental initiatives to address climate change could, if adopted, restrict our operations, require us to make capital or other expenditures to comply with these initiatives, increase our costs, impact our ability to compete or negatively impact efforts to obtain permits, licenses and other approvals for existing and new facilities.

Our inability to timely respond to the risks posed by climate change and the costs of compliance with climate change laws and regulations could have a material adverse impact on us.

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Fair Labor Standards Act, which governs such matters as minimum wages, the Family Medical Leave Act, overtime pay, compensable time, recordkeeping and other working conditions, Title VII of the Civil Rights Act, the Employee Retirement Income Security Act, the Americans with Disabilities Act, the National Labor Relations Act, regulations of the Equal Employment Opportunity Commission, regulations of the Office of Civil Rights, regulations of the Department of Labor, regulations of state attorneys general, federal and state wage and hour laws, and a variety of similar laws enacted by the federal and state governments that govern these and other employment-related matters.

As our employees are located in a number of states, compliance with these evolving federal, state and local laws and regulations could substantially increase our cost of doing business.

In recent years, companies have been subject to

lawsuits, including class action lawsuits, alleging violations of federal and state law regarding workplace and employment matters, overtime wage policies, discrimination and similar matters, some of which have resulted in the payment of meaningful damages by the defendants.

As our employees are located in a number of states, compliance with these evolving federal, state

and local laws and regulations could substantially increase our cost of doing business.

In recent years, companies have been subject to lawsuits, including class action lawsuits, alleging violations of federal and state law regarding workplace and employment matters, overtime wage policies, discrimination and similar matters, some of which have resulted in the payment of meaningful damages by the defendants.

Similar lawsuits may be threatened or instituted against us from time to time, and we may incur damages and expenses resulting from lawsuits of this type, which could have a material adverse effect on our business, financial condition or results of operations.

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

Our debt consists primarily of our borrowings under our Third Amended and Restated Credit Agreement with PNC Bank, National Association (successor in interest to BBVA USA) and certain other lenders party from time to time thereto (as amended, the “Credit Agreement”), which, as of September 30, 2023, provided for a $250.0 million term loan (the “Term Loan”), a $325.0 million revolving credit facility (the “Revolving Credit Facility”) and a $50.0 million delayed draw term loan (the “Delayed Draw Term Loan”, and together with the Term Loan, the “Term Loans”).

Our debt consists primarily of our borrowings under our (i) Term Loan A / Revolver Credit Agreement, which provides for a senior first lien term loan facility, under which $392.2 million of principal was outstanding at as of September 30, 2024 (the “Term Loan A”) and a $400.0 million revolving credit facility (the “Revolving Credit Facility”) and (ii) Term Loan Credit Agreement with Bank of America, N.A., as administrative agent, and certain lenders party from time to time thereto (the “Term Loan B Credit Agreement,” and together with the Term Loan A / Revolver Credit Agreement, the “Credit Agreements”), which provides for a fully drawn senior secured first lien term loan facility in the aggregate principal amount of $850 million (the “Term Loan B,” and together with the Term Loan A, the “Term Loans”).

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

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• limit our ability to exploit business opportunities.

Volatility in the credit markets, including due to the recent bank failures as well as the U.S.

Federal Reserve Bank’s actions and pace of interest rate increases to combat inflation in the United States, may further increase our interest payments.

secured overnight financing rate (“SOFR”)-based floating rate borrowings under the Credit Agreement, which expose us to variability in interest payments due to changes in the reference interest rates.

SOFR is a relatively new reference rate and has a limited history, and changes in SOFR have, on occasion, been more volatile than changes in other benchmark or market rates.

Volatility in the credit markets, including due to changes in interest rates in the United States, may further increase our interest payments.

We have secured overnight financing rate (“SOFR”)-based floating rate borrowings under the Credit Agreements, which expose us to variability in interest payments due to changes in the reference interest rates.

SOFR has a limited history as a reference rate, and changes in SOFR have, on occasion, been more volatile than changes in other benchmark or market rates.

As a result, the amount of interest we may pay on our variable rate indebtedness is difficult to predict.

Although the Credit Agreement restricts our ability to incur additional indebtedness, these restrictions are subject to a number of qualifications and exceptions, and we could incur substantial additional indebtedness in compliance with these restrictions.

Although the Credit Agreements restrict our ability to incur additional indebtedness, these restrictions are subject to a number of qualifications and exceptions, and we could incur substantial additional indebtedness in compliance with these restrictions.

This could reduce our ability to satisfy our current obligations and further exacerbate the risks to our financial condition described above.

The Credit Agreement restricts our ability to engage in some business and financial transactions.

The Credit Agreement contains a number of covenants that limit our ability to incur additional indebtedness or guarantees, create liens on assets, change our or our subsidiaries’ fiscal year, enter into sale and leaseback transactions, enter into certain restrictive agreements, engage in mergers or consolidations, participate in partnerships and joint ventures, sell assets, incur additional liens, pay dividends or distributions and make other restricted payments, make investments, loans or advances, repay or amend the terms of subordinated indebtedness, make acquisitions, enter into certain operating leases, enter into certain hedge transactions, amend material contracts and engage in certain transactions with affiliates.

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

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

The Credit Agreements restrict our ability to engage in some business and financial transactions.

The Credit Agreements contain a number of covenants that limit our ability to incur additional indebtedness or guarantees, create liens on assets, change our or our subsidiaries’ fiscal year, enter into sale and leaseback transactions, enter into certain restrictive agreements, engage in mergers or consolidations, participate in partnerships and joint ventures, sell assets, incur additional liens, pay dividends or distributions and make other restricted payments, make investments, loans or advances, repay or amend the terms of subordinated indebtedness, make acquisitions, enter into certain operating leases, enter into certain hedge transactions, amend material contracts and engage in certain transactions with affiliates.

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

If an event of default occurs, the lenders under the Credit Agreements will be entitled to accelerate amounts due thereunder and take

other actions permitted to be taken by a secured creditor, subject to an intercreditor agreement between the administrative agent under each Credit Agreement on behalf of the lenders party to each Credit Agreement.

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

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Section 404 also requires that our independent registered public accounting firm opine on those internal controls.

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

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

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

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As of November 20, 2024, our outstanding Class B common stock represented approximately 65.5% of the total voting power of our outstanding common stock.

The shares of Class B common stock are beneficially owned primarily by (i) SunTx Capital Partners, a private equity firm based in Dallas, Texas (“SunTx”), and funds that it manages, (ii) SunTx principals and their respective affiliates and family members, and (iii) certain members of management and our board of directors.

The shares of Class B common stock are owned primarily by (i) SunTx Capital Partners, a private equity firm based in Dallas, Texas (“SunTx”), and funds that it manages, (ii) SunTx principals and their respective affiliates and family members, and (iii) certain members of management and our board of directors.

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

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The conversion of shares of our Class B common stock into our Class A common stock will have the effect, over time, of increasing the relative voting power of each remaining share of Class B common stock.

Future sales, or the perception of future sales, of Class A common stock by us or our existing stockholders in the public market could cause the market price for our Class A common stock to decline.

As of November 27, 2023, we had outstanding a total of 43,711,058 shares of our Class A common stock and 8,998,511 shares of our Class B common stock that are convertible at any time into an equal number of shares of our Class A common stock.

The sale of shares of our Class A common stock, or the perception of future sales by us or our existing stockholders, could harm the prevailing market price of shares of our Class A common stock.

Future sales, or the perception of future sales, of Class A common stock by us or our existing stockholders in the public market could cause the market price for Class A common stock to decline.

As of November 20, 2024, we had outstanding a total of 46,963,255 shares of Class A common stock and 8,914,045 shares of Class B common stock that are convertible at any time into an equal number of shares of Class A common stock.

The sale of shares of Class A common stock, or the perception of future sales by us or our existing stockholders, could harm the prevailing market price of shares of Class A common stock.

These sales, or the possibility that these sales may occur, also might make it more difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate.

In the future, we may also issue our securities in connection with offerings or acquisitions, and the number of shares issued or issuable thereafter could constitute a material portion of the then-outstanding shares of Class A common stock.

Any such issuance would result in dilution to holders of our Class A common stock.

We have in the past, and we may in the future, issue our securities in connection with offerings or acquisitions, and the number of shares issued or issuable thereafter could constitute a material portion of the then-outstanding shares of Class A common stock.

Any such issuance would result in dilution to holders of Class A common stock.

SunTx, together with its principals and their respective affiliates and family members (collectively, the “SunTx Group”), controls us, and their interests may conflict with ours or yours in the future.

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Any future determination as to the declaration and payment of cash dividends will be at the discretion of our board of directors and will depend upon our financial condition, results of operations, contractual restrictions, capital requirements, business prospects and other factors deemed relevant by our board of directors.

In addition, the Credit Agreement restricts our ability to pay cash dividends.

In addition, the Credit Agreements restrict our ability to pay cash dividends.

As a result, only appreciation of the price of our Class A common stock, which may not occur, will provide a return to our stockholders.

Unresolved Staff Comments.

Cybersecurity

Not applicable.

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

What changed 10-K

Item 1A. Risk Factors