10q10k10q10k.net

What changed in Construction Partners, Inc.'s 10-K — 2023 vs 2024

vs

Paragraph-level year-over-year comparison of Construction Partners, Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+255 added−213 removedSource: 10-K (2024-11-25) vs 10-K (2023-11-29)

Top changes in Construction Partners, Inc.'s 2024 10-K

255 paragraphs added · 213 removed · 178 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

31 edited+23 added−9 removed64 unchanged
Biggest changeThe 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. 3 Table of Contents 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.
Biggest changeThe 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.
Moreover, we proactively recruit additional talent in both conventional and creative manners to fill open positions when promoting internally is not an option. 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.
Moreover, we proactively recruit additional talent in both conventional and creative manners to fill open positions when promoting internally is not an option. Like others in our industry, we experience some recurring employee turnover; however, we have historically been able to attract sufficient numbers of personnel to support the growth of our operations.
Item 1. Business Overview 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.
Item 1. Business Overview 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.
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.
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 our website.
Our first and second fiscal quarters typically have lower levels of activity due to adverse weather conditions. 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.
Our first and second fiscal quarters typically have lower levels of activity due to adverse weather conditions. 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, while a warm, dry spring may facilitate earlier project commencement dates.
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”).
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”).
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.
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.
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, our website is not part of or incorporated into this Annual Report on Form 10-K.
Publicly funded projects and third-party sales accounted for approximately 63%, and privately funded projects and third-party sales accounted for approximately 37%, of our fiscal 2023 revenues. Our public customers include federal agencies, state DOTs and local municipalities. Our private clients include commercial and residential developers and businesses. Our largest customers are state DOTs.
Publicly funded projects and third-party sales accounted for approximately 63%, and privately funded projects and third-party sales accounted for approximately 37%, of our fiscal 2024 revenues. Our public customers include federal agencies, state DOTs and local municipalities. Our private clients include commercial and residential developers and businesses. Our largest customers are state DOTs.
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; • restrictions on the types, quantities and concentration of materials that can be released into the environment; • limitation or prohibition of activities on certain lands lying within wilderness, wetlands, and other protected areas; • obligations to restore or reclaim former mining areas; 6 Table of Contents • requirements to comply with specific health and safety criteria addressing worker protection; and • the imposition of substantial liabilities for pollution resulting from our operations.
These laws and regulations impose numerous obligations and limitations on our operations, including: • 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; • limitation or prohibition of activities on certain lands lying within wilderness, wetlands, and other protected areas; • obligations to restore or reclaim former mining areas; • requirements to comply with specific health and safety criteria addressing worker protection; and • the imposition of substantial liabilities for pollution resulting from our operations.
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.
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 7 Table of Contents own actions that complied with applicable laws at the time those actions were taken.
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. We believe that we are well-positioned to compete effectively in the markets in which we operate.
Factors influencing our competitiveness include price, estimating abilities, knowledge of local markets and conditions, project management, financial strength, reputation for quality, aggregate materials 6 Table of Contents availability and machinery and equipment. We believe that we are well-positioned to compete effectively in the markets in which we operate.
Many projects are added to our contract backlog and completed within the same fiscal year and therefore may not be 5 Table of Contents reflected in our beginning or year-end contract backlog. Contract backlog does not include external sales of HMA, aggregates, and liquid asphalt cement.
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.
We believe that we have strong relationships with our employees. 7 Table of Contents Our business depends on a readily available supply of management, supervisory and field personnel. Attracting, training and retaining key personnel has been and will remain critical to our success.
We believe that we have strong relationships with our employees. Our business depends on a readily available supply of management, supervisory and field personnel. Attracting, training and retaining key personnel has been and will remain critical to our success.
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. The non-discretionary nature of highway and road construction services and materials supports stable and consistent industry funding.
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.
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.
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 5 Table of Contents is an extremely rare occurrence.
These quotations typically include 4 Table of Contents 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.
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.
Disadvantaged business enterprise regulations require us to use our good faith efforts to subcontract a specified portion of contract work done for governmental agencies to certain types of disadvantaged contractors or suppliers. Contract Backlog At September 30, 2023, our contract backlog was $1.6 billion compared to $1.4 billion at September 30, 2022.
Disadvantaged business enterprise regulations require us to use our good faith efforts to subcontract a specified portion of contract work done for governmental agencies to certain types of disadvantaged contractors or suppliers. Contract Backlog At September 30, 2024, our contract backlog was $2.0 billion, compared to $1.6 billion at September 30, 2023.
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.
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.
Backlog of uncompleted work on contracts under which work was either in progress or had not yet begun was $1.3 billion and $1.0 billion at September 30, 2023 and 2022, respectively.
Backlog of uncompleted work on contracts under which work was either in progress or had not yet begun was $1.5 billion and $1.3 billion at September 30, 2024 and 2023, respectively.
Low bid/no contract backlog was $0.3 billion and $0.4 billion at September 30, 2023 and 2022, respectively. At September 30, 2023, we expected approximately 73% of our contract backlog to be completed during the next 12 months.
Low bid/no contract backlog was $0.5 billion and $0.3 billion at September 30, 2024 and 2023, respectively. At September 30, 2024, we expected approximately 76% of our contract backlog to be completed during the next 12 months.
As used in this report, the terms “Company,” “we,” “our” and “us” refer to Construction Partners, Inc. 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.
As used in this report, the terms “Company,” “we,” “our” and “us” refer to Construction Partners, Inc. and its subsidiaries, except when the context requires that those terms mean only the parent company or a particular subsidiary. Recent Developments • ROAD-Map 2027.
Employees and Human Capital Resources As of September 30, 2023, we employed 1,146 salaried employees and 2,868 hourly employees. The total number of hourly personnel at a given time is subject to the volume of projects in progress and fluctuates on a seasonal basis.
Employees and Human Capital Resources As of September 30, 2024, we employed 1,325 salaried employees and 3,595 hourly employees. The total number of hourly personnel at a given time is subject to the volume of projects in progress and fluctuates on a seasonal basis.
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. Our 25 largest projects accounted for 16.5% of our revenues for the fiscal year ended September 30, 2023.
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.
For some contracts, we are required to furnish a warranty on our construction. These warranties, when required, are usually one year in length, but can extend up to three years according to the owners’ specifications. Historically, warranty claims have not been material to our business.
For the majority of our contracts, we receive our final payment when 4 Table of Contents contracts are near completion or fully completed. For some contracts, we are required to furnish a warranty on our construction. These warranties, when required, are usually one year in length, but can extend up to three years according to the owners’ specifications.
Types of Contracts Our public customer contracts are primarily fixed unit price contracts. Pricing on a fixed unit price contract is typically based on approved quantities. Our 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.
Our 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. We also occasionally enter into design-build contracts, which generally are performed under fixed total price contracts.
In addition, certain operational employees are required to complete a safety course approved by the Occupational Safety and Health Administration (“OSHA”) or the Mine Safety and Health Administration (“MSHA”), as applicable. Moreover, we promote a culture of safety by encouraging employees to immediately correct and report all unsafe conditions. Website Information The Company maintains a website at www.constructionpartners.net.
In addition, certain operational employees are required to complete a safety course approved by the Occupational Safety and Health Administration (“OSHA”) or the Mine Safety and Health Administration (“MSHA”), as applicable.
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.
The total transaction consideration for these acquisitions was approximately $231.7 million. For further discussion regarding these transactions, see Note 4 - Business Acquisitions to the consolidated financial statements included elsewhere in this report. • Lone Star Paving Acquisition .
We regularly monitor and review our operations, procedures, and policies for compliance with our operating permits and related laws and regulations.
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.
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.
Asphalt paving mix is the most common roadway material used today due to its cost effectiveness, durability and reusability, and minimized traffic disruption during paving, as compared to concrete. 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.
During fiscal year 2023, the number of hourly employees ranged from 2,656 to 2,892 employees and averaged 2,782 employees. We are not subject to any collective bargaining agreements with respect to any of our employees.
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.
Removed
The total transaction consideration for these acquisitions was approximately $92.0 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.
Added
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.
Removed
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.
Added
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.
Removed
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.
Added
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.
Removed
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.
Added
Wheeler, in his capacity as the selling unit holders’ representative thereunder) and (ii) 3.0 million shares of Class A common stock.
Removed
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.
Added
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.
Removed
Our Industry We operate in the large and growing highway and road construction industry and specifically within the asphalt paving materials and services segment. Asphalt paving mix is the most common roadway material used today due to its cost effectiveness, durability and reusability, and minimized traffic disruption during paving, as compared to concrete.
Added
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.
Removed
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.
Added
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”).
Removed
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.
Added
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”).
Removed
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.
Added
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.
Added
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.
Added
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. 3 Table of Contents • Credit Agreement Amendments.
Added
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.
Added
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.
Added
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.
Added
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.
Added
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.
Added
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.
Added
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.
Added
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.
Added
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 throughout the Sunbelt in Alabama, Florida, Georgia, North Carolina, South Carolina, Tennessee and Texas.
Added
Our 25 largest projects accounted for 15.7% of our revenues for the fiscal year ended September 30, 2024. Types of Contracts Our public customer contracts are primarily fixed unit price contracts. Pricing on a fixed unit price contract is typically based on approved quantities.
Added
Historically, warranty claims have not been material to our business.
Added
Moreover, we promote a culture of safety by encouraging employees to immediately correct and report all unsafe conditions. 8 Table of Contents Website Information We maintain a website at www.constructionpartners.net.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

59 edited+8 added−3 removed206 unchanged
Biggest changeOur 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”).
Biggest changeOur 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”).
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.
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.
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.
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.
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.
The costs incurred and profit realized, if any, on our contracts can vary, sometimes substantially, from our original projections due to a variety of factors, including, but not limited to: • the failure to include materials or work in a bid, or the failure to estimate properly the quantities or costs needed to complete a fixed total price contract; • delays caused by weather conditions or otherwise failing to meet scheduled acceptance dates; • contract or project modifications or conditions creating unanticipated costs that are not covered by change orders; • changes in the availability, proximity and costs of materials, including liquid asphalt cement, aggregates and other construction materials, as well as fuel and lubricants for our equipment; • to the extent not covered by contractual cost escalators, variability in, and our inability to predict, the costs of diesel fuel, liquid asphalt and cement; • the availability and skill level of workers; • onsite conditions that differ from those assumed in the original bid; • the failure by our suppliers, subcontractors, designers, engineers or customers to perform their obligations; • fraud, theft or other improper activities by our suppliers, subcontractors, designers, engineers, customers or personnel; • mechanical problems with our machinery or equipment; • citations issued by a government authority, including OSHA or MSHA; • difficulties in obtaining required government permits or approvals; • changes in applicable laws and regulations; • uninsured claims or demands from third parties for alleged damages arising from the design, construction or use and operation of a project of which our work is part; and • public infrastructure customers seeking to impose contractual risk-shifting provisions that result in increased risks to us.
The costs incurred and profit realized, if any, on our contracts can vary, sometimes substantially, from our original projections due to a variety of factors, including, but not limited to: 10 Table of Contents • the failure to include materials or work in a bid, or the failure to estimate properly the quantities or costs needed to complete a fixed total price contract; • delays caused by weather conditions or otherwise failing to meet scheduled acceptance dates; • contract or project modifications or conditions creating unanticipated costs that are not covered by change orders; • changes in the availability, proximity and costs of materials, including liquid asphalt cement, aggregates and other construction materials, as well as fuel and lubricants for our equipment; • to the extent not covered by contractual cost escalators, variability in, and our inability to predict, the costs of diesel fuel, liquid asphalt and cement; • the availability and skill level of workers; • onsite conditions that differ from those assumed in the original bid; • the failure by our suppliers, subcontractors, designers, engineers or customers to perform their obligations; • fraud, theft or other improper activities by our suppliers, subcontractors, designers, engineers, customers or personnel; • mechanical problems with our machinery or equipment; • citations issued by a government authority, including OSHA or MSHA; • difficulties in obtaining required government permits or approvals; • changes in applicable laws and regulations; • uninsured claims or demands from third parties for alleged damages arising from the design, construction or use and operation of a project of which our work is part; and • public infrastructure customers seeking to impose contractual risk-shifting provisions that result in increased risks to us.
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.
In addition, a material weakness in the effectiveness of our internal control over financial reporting could result in an increased chance of fraud and the loss of customers, reduce our ability to obtain financing, subject us to investigations by the SEC or other regulatory authorities and require additional expenditures to comply with these requirements, each of which could have a material adverse effect on our business, results of operations and financial condition. 20 Table of Contents Risks Relating to Ownership of Our Class A Common Stock The dual class structure of our common stock has the effect of concentrating voting control with holders of our Class B common stock, which limits the ability of holders of our Class A common stock to influence corporate matters.
In addition, a material weakness in the effectiveness of our internal control over financial reporting could result in an increased chance of fraud and the loss of customers, reduce our ability to obtain financing, subject us to investigations by the SEC or other regulatory authorities and require additional expenditures to comply with these requirements, each of which could have a material adverse effect on our business, results of operations and financial condition. 21 Table of Contents Risks Relating to Ownership of Our Class A Common Stock The dual class structure of our common stock has the effect of concentrating voting control with holders of our Class B common stock, which limits the ability of holders of our Class A common stock to influence corporate matters.
Any decline in available funding or access to our cash and liquidity resources, or non-compliance of banking and financial services counterparties with their contractual commitments to us could, among other risks, have material adverse impacts on our ability to meet our operating expenses and other financial needs, could result in breaches of our financial and/or contractual obligations and could have material adverse impacts on our business, financial condition and results of operations. 19 Table of Contents General Risks Force majeure events, such as natural disasters, pandemics and terrorist attacks, and unexpected equipment failures could negatively impact our business, which may affect our financial condition, results of operations or cash flows.
Any decline in available funding or access to our cash and liquidity resources, or non-compliance of banking and financial services counterparties with their contractual commitments to us could, among other risks, have material adverse impacts on our ability to meet our operating expenses and other financial needs, could result in breaches of our financial and/or contractual obligations and could have material adverse impacts on our business, financial condition and results of operations. 20 Table of Contents General Risks Force majeure events, such as natural disasters, pandemics and terrorist attacks, and unexpected equipment failures could negatively impact our business, which may affect our financial condition, results of operations or cash flows.
If our products do not satisfy these requirements and specifications, material claims may arise against us, our reputation could be damaged and, if any such claims are for an uninsured, non-indemnified or product-related matter, then resolution of such claims against us could have a material adverse effect on our financial condition, results of operations or liquidity. 15 Table of Contents We are, and may continue to be, involved in routine litigation and government inquiries in the ordinary course of business.
If our products do not satisfy these requirements and specifications, material claims may arise against us, our reputation could be damaged and, if any such claims are for an uninsured, non-indemnified or product-related matter, then resolution of such claims against us could have a material adverse effect on our financial condition, results of operations or liquidity. 16 Table of Contents We are, and may continue to be, involved in routine litigation and government inquiries in the ordinary course of business.
Environmental Protection Agency (the “EPA”) 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.
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.
Shares of our Class B common stock may be transferred to an unrelated third party if holders of a majority of the shares of our Class B common stock owned by SunTx and its affiliates consent to such transfer in writing in advance. 21 Table of Contents We may issue preferred stock with terms that could adversely affect the voting power or value of our Class A common stock.
Shares of our Class B common stock may be transferred to an unrelated third party if holders of a majority of the shares of our Class B common stock owned by SunTx and its affiliates consent to such transfer in writing in advance. 22 Table of Contents We may issue preferred stock with terms that could adversely affect the voting power or value of our Class A common stock.
In addition, if the total costs of a project exceed our original estimates, we could experience reduced profits or a loss for that project. 14 Table of Contents The construction services industry is highly schedule-driven, and our failure to meet the schedule requirements of our contracts could adversely affect our reputation and/or expose us to financial liability.
In addition, if the total costs of a project exceed our original estimates, we could experience reduced profits or a loss for that project. 15 Table of Contents The construction services industry is highly schedule-driven, and our failure to meet the schedule requirements of our contracts could adversely affect our reputation and/or expose us to financial liability.
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 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.
Alternatively, if a court were to 22 Table of Contents find these provisions inapplicable to, or unenforceable in respect of, one or more covered proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect our business and financial condition.
Alternatively, if a court were to 23 Table of Contents find these provisions inapplicable to, or unenforceable in respect of, one or more covered proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect our business and financial condition.
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.
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.
An overall labor shortage, lack of skilled labor, increased turnover or labor inflation could have a material adverse impact on our operations, results of operations, liquidity or cash flows. 13 Table of Contents We depend on third parties for equipment and supplies essential to operate our business.
An overall labor shortage, lack of skilled labor, increased turnover or labor inflation could have a material adverse impact on our operations, results of operations, liquidity or cash flows. 14 Table of Contents We depend on third parties for equipment and supplies essential to operate our business.
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 cannot predict the timing or size of any future acquisitions.
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.
Any reduction in federal highway funding, particularly in the amounts allocated to states in which we operate, could have a material adverse effect on our results of operations. Each state funds its infrastructure spending from specially allocated amounts collected from various state taxes, typically fuel taxes and vehicle fees, as well as from voter-approved bond programs.
Any reduction in federal highway funding, particularly in the amounts allocated to states in which we operate, could have a material adverse effect on our results of operations. 9 Table of Contents Each state funds its infrastructure spending from specially allocated amounts collected from various state taxes, typically fuel taxes and vehicle fees, as well as from voter-approved bond programs.
The success of our business depends, in part, on our ability to execute on our acquisition strategy, to successfully integrate acquired businesses and to retain key employees of acquired businesses. Since our inception, we have acquired and integrated 41 complementary businesses, which have contributed significantly to our growth.
The success of our business depends, in part, on our ability to execute on our acquisition strategy, to successfully integrate acquired businesses and to retain key employees of acquired businesses. Since our inception, we have acquired and integrated 48 complementary businesses, which have contributed significantly to our growth.
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.
In addition, our results of operations from these acquisitions could, in the future, result in 12 Table of Contents 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.
During the fiscal year ended September 30, 2023, we generated approximately 63% of our construction contract revenues from publicly funded construction projects and the sale of construction materials to public customers at the federal, state and local levels.
During the fiscal year ended September 30, 2024, we generated approximately 63% of our construction contract revenues from publicly funded construction projects and the sale of construction materials to public customers at the federal, state and local levels.
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.
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.
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 9 Table of Contents comparable work becomes available.
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.
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.
In recent years, companies have been subject to 17 Table of Contents 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.
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.
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.
Risks Related to our Business 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.
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.
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 Agreements restrict our ability to pay cash dividends.
In addition, governmental initiatives to address climate change could, if 16 Table of Contents 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.
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.
At September 30, 2023, our contract backlog was $1.6 billion, compared to $1.4 billion at September 30, 2022. Our contract backlog generally consists of construction projects for which we either have an executed contract or commitment with a client or have submitted the currently lowest bid. Contract backlog does not include external sales of HMA, aggregates and liquid asphalt cement.
At September 30, 2024, our contract backlog was $2.0 billion, compared to $1.6 billion at September 30, 2023. Our contract backlog generally consists of construction projects for which we either have an executed contract or commitment with a client or have submitted the currently lowest bid. Contract backlog does not include external sales of HMA, aggregates and liquid asphalt cement.
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.
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.
As our employees are located in a number of states, compliance with these evolving federal, state 18 Table of Contents and local laws and regulations could substantially increase our cost of doing business.
The property, plants and equipment needed to produce our products and provide our services can be expensive. We must spend a substantial amount of capital to purchase and maintain such assets.
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.
At September 30, 2023 and 2022, we had $159.3 million and $129.5 million, respectively, of goodwill recorded on our Consolidated Balance Sheets. We assess goodwill for impairment annually or more often if required. Our assessments involve a number of estimates and assumptions that are inherently subjective and require significant judgment regarding highly uncertain matters that are subject to change.
At September 30, 2024 and 2023, we had $231.7 million and $159.3 million, respectively, of goodwill recorded on our Consolidated Balance Sheets. We assess goodwill for impairment annually or more often if required. Our assessments involve a number of estimates and assumptions that are inherently subjective and require significant judgment regarding highly uncertain matters that are subject to change.
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.
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.
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.
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.
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.
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.
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).
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).
The potential impact of climate change on our operations and our customers remains uncertain. The primary risk that climate change poses to our business is the potential for increases in the volume, frequency and intensity of rainfall and tropical storms, which would impair our ability to perform our construction projects.
The primary risk that climate change poses to our business is the potential for increases in the volume, frequency and intensity of rainfall and tropical storms, which would impair our ability to perform our construction projects.
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.
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.
The loss of our ability to competitively bid for certain projects or successfully contract with state DOTs could have a material adverse effect on our business . Our largest customers are state DOTs.
We derive a significant portion of our revenues from state DOTs. The loss of our ability to competitively bid for certain projects or successfully contract with state DOTs could have a material adverse effect on our business . Our largest customers are state DOTs.
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.
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.
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. Because our industry is capital-intensive and we have significant fixed and semi-fixed costs, our profitability is sensitive to changes in volume.
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. 11 Table of Contents Because our industry is capital-intensive and we have significant fixed and semi-fixed costs, our profitability is sensitive to changes in volume.
Factors affecting the successful integration of an acquired business include, but are not limited to, the following: • our responsibility for certain liabilities of an acquired business, whether or not known to us, which could include, among other things, tax liabilities, product and other tort liabilities, breach of contract claims, environmental liabilities, permitting and regulatory compliance issues and liabilities for employment practices; • our ability to retain local managers and key employees who are important to the operations of an acquired business; • the attention required by our senior management and the management of an acquired business for integration efforts, which could decrease the time that they have to service and attract customers; • our ability to effectively utilize new equipment that we acquire; • the implementation of our financial and management information systems, business practices and policies; • our pursuit of multiple acquisition opportunities simultaneously; and • unforeseen expenses, complications and delays, including difficulties in employing sufficient staff and maintaining operational and management oversight. 11 Table of Contents 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.
Factors affecting the successful integration of an acquired business include, but are not limited to, the following: • our responsibility for certain liabilities of an acquired business, whether or not known to us, which could include, among other things, tax liabilities, product and other tort liabilities, breach of contract claims, environmental liabilities, permitting and regulatory compliance issues and liabilities for employment practices; • our ability to retain local managers and key employees who are important to the operations of an acquired business; • the attention required by our senior management and the management of an acquired business for integration efforts, which could decrease the time that they have to service and attract customers; • our ability to effectively utilize new equipment that we acquire; • the implementation of our financial and management information systems, business practices and policies; • our pursuit of multiple acquisition opportunities simultaneously; and • unforeseen expenses, complications and delays, including difficulties in employing sufficient staff and maintaining operational and management oversight.
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.
To successfully acquire a target, we may need to raise additional equity and/or incur additional indebtedness, which could increase our leverage level. We may be unable to identify and complete acquisition transactions on favorable terms, or at all.
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.
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. 12 Table of Contents Design-build contracts subject us to the risk of design errors and omissions.
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. 13 Table of Contents Design-build contracts subject us to the risk of design errors and omissions.
Our Class B common stock has ten votes per share, and our Class A common stock has one vote per share. As of November 27, 2023, our outstanding Class B common stock represented approximately 67.3% of the total voting power of our outstanding common stock.
Our Class B common stock has ten votes per share, and our Class A common stock has one vote per share. 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 loss or reduction of our ability to competitively bid for certain projects or successfully contract with state DOTs could have a material adverse effect on our financial condition, results of operation and liquidity.
We believe that we will continue to rely on state DOTs for a substantial portion of our revenues for the foreseeable future. The loss or reduction of our ability to competitively bid for certain projects or successfully contract with state DOTs could have a material adverse effect on our financial condition, results of operation and liquidity.
In addition, any instability in the financial and credit markets could negatively impact our customers’ ability to pay us on a timely basis, or at all, for work on projects already in progress, could cause our customers to delay or cancel construction projects in our contract backlog and could create difficulties for customers to obtain adequate financing to fund new construction projects, including through the issuance of municipal bonds. 8 Table of Contents Our business depends on federal, state and local government spending for public infrastructure construction, and reductions in government funding could adversely affect our results of operations.
In addition, any instability in the financial and credit markets could negatively impact our customers’ ability to pay us on a timely basis, or at all, for work on projects already in progress, could cause our customers to delay or cancel construction projects in our contract backlog and could create difficulties for customers to obtain adequate financing to fund new construction projects, including through the issuance of municipal bonds.
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 18 Table of Contents creditor.
If an event of default occurs, the lenders under the Credit Agreements will be entitled to accelerate amounts due thereunder and take 19 Table of Contents 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.
As of November 27, 2023, the SunTx Group beneficially owned approximately 2.0% of our outstanding Class A common stock and approximately 76.3% of our outstanding Class B common stock, representing approximately 52.0% of the combined voting power of our common stock.
As of November 20, 2024, the SunTx Group beneficially owned approximately 1.0% of our outstanding Class A common stock and approximately 79.0% of our outstanding Class B common stock, representing approximately 52.1% of the combined voting power of our common stock.
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, 10 Table of Contents 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 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.
Moreover, public interest in the protection of the environment has increased dramatically in recent years. 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. Climate change and related laws and regulations could adversely affect us.
Moreover, public interest in the protection of the environment has increased dramatically in recent years. 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.
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.
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.
Shortages in state tax revenues can reduce the amount spent or delay expenditures on state infrastructure projects. 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.
Shortages in state tax revenues can reduce the amount spent or delay expenditures on state infrastructure projects. Many states have experienced state-level funding pressures caused by lower tax revenues and an inability to finance approved projects. Any reduction in state infrastructure funding in the states in which we operate could have a material adverse effect on our results of operations.
We have 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.
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.
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.
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. We believe that we will continue to rely on state DOTs for a substantial portion of our revenues for the foreseeable future.
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.
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 Agreements restrict our ability to engage in some business and financial transactions.
Removed
Any reduction in state infrastructure funding in the states in which we operate could have a material adverse effect on our results of operations. We derive a significant portion of our revenues from state DOTs.
Added
Our business depends on federal, state and local government spending for public infrastructure construction, and reductions in government funding could adversely affect our results of operations.
Removed
We cannot guarantee that we will achieve synergies and cost savings in connection with future acquisitions.
Added
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.
Removed
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.
Added
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.
Added
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.
Added
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.
Added
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. The potential impact of climate change on our operations and our customers remains uncertain.
Added
These changes could be severe and 17 Table of Contents could negatively impact demand for our products and services.
Added
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.

Item 2. Properties

Properties — owned and leased real estate

4 edited+1 added−0 removed0 unchanged
Biggest changeItem 2. Properties . Our principal executive office is located in Dothan, Alabama, in a building that we own. As of September 30, 2023, we operated (i) 67 HMA plants in Alabama, Florida, Georgia, North Carolina, South Carolina and Tennessee, (ii) 13 aggregates facilities in Alabama, Georgia, and Florida, and (iii) two liquid asphalt terminals in Alabama and Florida.
Biggest changeAs of November 20, 2024, we operated (i) 84 HMA plants in Alabama, Florida, Georgia, North Carolina, South Carolina, Tennessee and Texas, (ii) 17 aggregates facilities in Alabama, Florida, Georgia and Texas and (iii) three liquid asphalt terminals in Alabama, Florida and Texas. Our HMA plants operate at varying levels of utilization depending on market conditions.
However, we routinely evaluate the purchase or lease of additional properties or the consolidation of our properties as our business needs change. The table below summarizes the locations and the nature of our ownership or leasehold interest in each of our HMA plants, aggregates facilities and liquid asphalt terminals as of September 30, 2023.
However, we routinely evaluate the purchase or lease of additional properties or the consolidation of our properties as our business needs change. The table below summarizes the locations and the nature of our ownership or leasehold interest in each of our HMA plants, aggregates facilities and liquid asphalt terminals as of November 20, 2024.
Our HMA plants operate at varying levels of utilization depending on market conditions. We maintain offices at our HMA plants and aggregates facilities as we determine to be appropriate under the circumstances. We consider our plants and other physical properties, whether owned or leased, to be suitable, adequate, and of sufficient productive capacity to meet the requirements of our business.
We maintain offices at our HMA plants, aggregates facilities and terminals as we determine to be appropriate under the circumstances. We consider our plants and other physical properties, whether owned or leased, to be suitable, adequate, and of sufficient productive capacity to meet the requirements of our business.
HMA Plants Aggregates Facilities Liquid Asphalt Terminals Location Owned Leased Owned Leased Owned Leased Alabama 10 7 6 3 1 — Florida 10 1 1 — 1 — Georgia 6 1 1 2 — — North Carolina 12 10 — — — — South Carolina 4 3 — — — — Tennessee — 3 — — — — 23 Table of Contents
HMA Plants Aggregates Facilities Liquid Asphalt Terminals Location Owned Leased Owned Leased Owned Leased Alabama 8 6 6 3 1 — Florida 10 2 1 — 1 — Georgia 9 3 1 2 — — North Carolina 12 11 — — — — South Carolina 4 6 — — — — Tennessee — 3 — — — — Texas 7 3 3 1 1 —
Added
Item 2. Properties . Our principal executive office is located in Dothan, Alabama, in a building that we own.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

1 edited+0 added−0 removed0 unchanged
Biggest changeItem 4. Mine Safety Disclosures. The information concerning mine safety violations or other regulatory matters required by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of Regulation S-K (17 C.F.R. Part 229.104) is included in Exhibit 95.1 to this report. 24 Table of Contents PART II
Biggest changeItem 4. Mine Safety Disclosures. The information concerning mine safety violations or other regulatory matters required by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of Regulation S-K (17 C.F.R. Part 229.104) is included in Exhibit 95.1 to this report. 25 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

8 edited+2 added−2 removed3 unchanged
Biggest changeMarket for Our Common Stock Our Class A common stock is listed and trades on the Nasdaq Global Select Market under the symbol “ROAD.” Prior to its listing on the Nasdaq Global Select Market on May 4, 2018, there was no established public trading market for our Class A common stock.
Biggest changeItem 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Market for Our Common Stock Our Class A common stock is listed and trades on The Nasdaq Global Select Market under the symbol “ROAD.” There is no established public trading market for our Class B common stock.
In addition, the terms of the Credit Agreement restrict our ability to pay cash dividends to the holders of our common stock unless, after giving effect to such dividend, we would remain in compliance with the financial covenants and, at the time any such dividend is made, no default or event of default exists or would result from the payment of such dividend.
In addition, the Credit Agreements restrict our ability to pay cash dividends to the holders of our common stock unless, after giving effect to such dividend, we would remain in compliance with the financial covenants and, at the time any such dividend is made, no default or event of default exists or would result from the payment of such dividend.
Value as of September 30, 2018 2019 2020 2021 2022 2023 Construction Partners, Inc. $100.00 $128.76 $150.41 $275.79 $216.78 $302.15 NASDAQ Composite Index $100.00 $99.42 $138.79 $179.57 $131.43 $164.29 Dow Jones US Heavy Construction Index $100.00 $97.52 $94.70 $162.83 $175.64 $226.32 The information under the heading “Stock Performance Graph” shall not be deemed “soliciting material” or to be “filed” with the SEC, nor shall such information be incorporated by reference into any future filing under the Securities Act or the Exchange Act, except to the extent that the Company specifically incorporates it by reference into such filing.
Value as of September 30, 2019 2020 2021 2022 2023 2024 Construction Partners, Inc. $128.76 $150.41 $275.79 $216.78 $302.15 $576.86 NASDAQ Composite Index $99.42 $138.79 $179.57 $131.43 $164.29 $226.05 Dow Jones US Heavy Construction Index $97.52 $94.70 $162.83 $175.64 $226.32 $330.17 The information under the heading “Stock Performance Graph” shall not be deemed “soliciting material” or to be “filed” with the SEC, nor shall such information be incorporated by reference into any future filing under the Securities Act or the Exchange Act, except to the extent that the Company specifically incorporates it by reference into such filing.
Heavy Construction index. The graph tracks the performance of a $100 investment in our Class A common stock and in each index (with the reinvestment of all dividends) from September 30, 2018 through September 30, 2023.
Heavy Construction Index. The graph tracks the performance of a $100 investment in our Class A common stock and in each index (with the reinvestment of all dividends) from September 30, 2019 through September 30, 2024.
The last sale price for a share of our Class A common stock as reported on the Nasdaq Global Select Market on November 27, 2023 was $43.30. As of November 27, 2023, there were 8,998,511 shares of our Class B common stock outstanding, held by 36 stockholders of record.
The last sale price for a share of our Class A common stock as reported on the Nasdaq Global Select Market on November 20, 2024 was $91.31. As of November 20, 2024, there were 8,914,045 shares of our Class B common stock outstanding, held by 40 stockholders of record.
Issuer Purchases of Equity Securities During the quarter ended September 30, 2023, we did not purchase any of our equity securities that are registered under Section 12(b) of the Exchange Act. 25 Table of Contents Stock Performance Graph The following graph compares the cumulative five-year total return provided to the Company’s Class A common stock holders relative to the cumulative total returns of the NASDAQ Composite index and the Dow Jones U.S.
The specific timing and amount of any future purchases will vary based on market conditions, securities law limitations and other factors. 26 Table of Contents Stock Performance Graph The following graph compares the cumulative five-year total return provided to the Company’s Class A common stock holders relative to the cumulative total returns of the NASDAQ Composite Index and the Dow Jones U.S.
There is no established public trading market for our Class B common stock. Holders As of November 27, 2023, there were 43,711,058 shares of our Class A common stock outstanding, held by 99 stockholders of record.
Holders As of November 20, 2024, there were 46,963,255 shares of our Class A common stock outstanding, held by 182 stockholders of record.
Recent Sales of Unregistered Securities We did not sell any of our equity securities during the period covered by this report that were not registered under the Securities Act.
Recent Sales of Unregistered Securities There were no sales of unregistered equity securities during the period covered by this report that were not previously reported in a Quarterly Report on Form 10-Q or a Current Report on Form 8-K.
Removed
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. From our inception until April 2018, we maintained a single class of common stock.
Added
Issuer Purchases of Equity Securities The following table sets forth information regarding the repurchase of shares of our Class A common stock during the three months ended September 30, 2024: Period Total number of shares purchased Average price paid per share Total number of shares purchased as part of publicly announced plans or programs Approximate dollar value of shares that may yet be purchased under the plans or programs (1) July 1, 2024 through July 31, 2024 44,002 $ 57.62 44,002 $ 32,194,980 August 1, 2024 through August 31, 2024 36,331 $ 59.82 36,331 $ 30,021,791 September 1, 2024 through September 30, 2024 — $ — — $ 30,021,791 Total 80,333 $ 58.60 80,333 (1) In April 2024, the board of directors authorized the Company to purchase up to $40.0 million of our Class A common stock in open market purchases, privately negotiated transactions or by other means.
Removed
On April 23, 2018, we amended and restated our certificate of incorporation to effectuate a dual-class equity structure, which resulted in the conversion of each share of our then-outstanding common stock into 25.2 shares of Class B common stock and the initial authorization of Class A common stock for issuance.
Added
The stock repurchase plan expires September 30, 2025.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

68 edited+42 added−11 removed65 unchanged
Biggest changeFor a description of Adjusted EBITDA and Adjusted EBITDA Margin, as well as a reconciliation of Adjusted EBITDA to net income, see “How We Assess Performance of Our Business.” Liquidity and Capital Resources Cash Flows Analysis The following table sets forth our cash flows for the periods indicated (in thousands): For the Fiscal Year Ended September 30, 2023 2022 Net cash provided by operating activities, net of acquisitions $ 157,157 $ 16,498 Net cash used in investing activities (143,372) (197,326) Net cash (used in) provided by financing activities (264) 159,136 Net change in cash, cash equivalents and restricted cash $ 13,521 $ (21,692) Operating Activities During fiscal 2023, cash provided by operating activities, net of acquisitions, was $157.2 million, primarily as a result of: • net income of $49.0 million, reflecting $79.1 million of depreciation, depletion, accretion and amortization, deferred income taxes of $11.2 million, equity-based compensation expense of $10.8 million, gain on sale of property, plant and equipment of $7.0 million, gain on facility exchange of $5.4 million; • an increase in contracts receivable including retainage of $26.0 million as a result of higher overall revenues due to acquisitions and growth in existing markets; • an increase in inventories of $7.3 million due to increased inventories from acquisitions, growth in existing markets, higher inventory costs and normal fluctuations in our inventory cycle; • a decrease in prepaid expenses and other current assets of $3.7 million, primarily due to the timing of payments under our insurance policies and other expenses; • an increase in accounts payable and accrued expenses and other current liabilities of $19.6 million due to an increase in construction activity; and • a net increase in the difference between billings in excess of costs and estimated earnings on uncompleted contracts and costs and estimated earnings in excess of billings on uncompleted contracts of $26.7 million due to the timing of performing and closing projects.
Biggest changeFor a description of Adjusted EBITDA and Adjusted EBITDA Margin, as well as a reconciliation of Adjusted EBITDA to net income, see above under the heading “How We Assess Performance of Our Business — Other Key Performance Indicators — Adjusted EBITDA and Adjusted EBITDA Margin.” Liquidity and Capital Resources Cash Flows Analysis The following table sets forth our cash flows for the periods indicated (in thousands): For the Fiscal Year Ended September 30, 2024 2023 Net cash provided by operating activities, net of acquisitions $ 209,079 $ 157,157 Net cash used in investing activities (307,585) (143,372) Net cash (used in) provided by financing activities 126,110 (264) Net change in cash, cash equivalents and restricted cash $ 27,604 $ 13,521 Operating Activities During fiscal 2024, cash provided by operating activities, net of acquisitions, was $209.1 million, primarily as a result of: • net income of $68.9 million, reflecting, among other things, $92.9 million of depreciation, depletion, accretion and amortization, deferred income taxes of $22.7 million, share-based compensation expense of $14.4 million, and gain on sale of property, plant and equipment of $4.5 million; • an increase in contracts receivable including retainage of $6.6 million as a result of higher overall revenues due to acquisitions and growth in existing markets; • an increase in inventories of $15.5 million due to increased inventories from acquisitions, growth in existing markets, higher inventory costs and normal fluctuations in our inventory cycle; • an increase in prepaid expenses and other current assets of $13.0 million, primarily due to the timing of payments under our insurance policies and other expenses; • an increase in accounts payable and accrued expenses and other current liabilities of $18.3 million due to an increase in construction activity; and • a net increase in the difference between billings in excess of costs and estimated earnings on uncompleted contracts and costs and estimated earnings in excess of billings on uncompleted contracts of $30.4 million due to the timing of performing and closing projects. 33 Table of Contents During fiscal 2023, cash provided by operating activities, net of acquisitions, was $157.2 million, primarily as a result of: • net income of $49.0 million, reflecting, among other things, $79.1 million of depreciation, depletion, accretion and amortization, deferred income taxes of $11.2 million, share-based compensation expense of $10.8 million, gain on sale of property, plant and equipment of $7.0 million, and gain on facility exchange of $5.4 million; • an increase in contracts receivable including retainage of $26.0 million as a result of higher overall revenues due to acquisitions and growth in existing markets; • an increase in inventories of $7.3 million due to increased inventories from acquisitions, growth in existing markets, higher inventory costs and normal fluctuations in our inventory cycle; • a decrease in prepaid expenses and other current assets of $3.7 million, primarily due to the timing of payments under our insurance policies and other expenses; • an increase in accounts payable and accrued expenses and other current liabilities of $19.6 million due to an increase in construction activity; and • a net increase in the difference between billings in excess of costs and estimated earnings on uncompleted contracts and costs and estimated earnings in excess of billings on uncompleted contracts of $26.7 million due to the timing of performing and closing projects.
The most significant of these include: • the completeness and accuracy of the original bid; • costs associated with scope changes; • changes in costs of labor and/or materials; • extended overhead and other costs due to owner, weather and other delays; • subcontractor performance issues; • changes in productivity expectations; • site conditions that differ from those assumed in the original bid; • changes from original design on design-build projects; • the availability and skill level of workers in the geographic location of the project; • a change in the availability and proximity of equipment and materials; • our ability to fully and promptly recover on affirmative claims and back charges for additional contract costs; and • the customer’s ability to properly administer the contract.
The most significant of these include: • the completeness and accuracy of the original bid; • costs associated with scope changes; • changes in costs of labor and/or materials; • extended overhead and other costs due to owner, weather and other delays; 37 Table of Contents • subcontractor performance issues; • changes in productivity expectations; • site conditions that differ from those assumed in the original bid; • changes from original design on design-build projects; • the availability and skill level of workers in the geographic location of the project; • a change in the availability and proximity of equipment and materials; • our ability to fully and promptly recover on affirmative claims and back charges for additional contract costs; and • the customer’s ability to properly administer the contract.
If we seek additional capital, we may do so through borrowings under the Credit Agreement, joint ventures, asset sales, offerings of debt or equity securities or other means. However, our ability to engage in any such transactions may be constrained by economic conditions and other factors outside of our control.
If we seek additional capital, we may do so through borrowings under the Credit Agreements, joint ventures, asset sales, offerings of debt or equity securities or other means. However, our ability to engage in any such transactions may be constrained by economic conditions and other factors outside of our control.
On the basis of our evaluations, at September 30, 2023 and 2022, no valuation allowance was recorded on our net deferred tax assets, and we had no material uncertain tax positions. If our estimates or assumptions regarding our current and deferred tax items are inaccurate or are modified, these changes could have potentially material impacts on our earnings.
On the basis of our evaluations, at September 30, 2024 and 2023, no valuation allowance was recorded on our net deferred tax assets, and we had no material uncertain tax positions. If our estimates or assumptions regarding our current and deferred tax items are inaccurate or are modified, these changes could have potentially material impacts on our earnings.
For fiscal 2023 and fiscal 2022, there were no events or changes in circumstances that would indicate a material impairment of our long-lived assets. Goodwill and indefinite-lived intangible assets must be tested for impairment at least annually. We performed our most recent annual impairment test on July 1, 2023.
For fiscal 2024 and fiscal 2023, there were no events or changes in circumstances that would indicate a material impairment of our long-lived assets. Goodwill and indefinite-lived intangible assets must be tested for impairment at least annually. We performed our most recent annual impairment test on July 1, 2024.
We purchase separate stop-loss insurance, which limits the individual participant claim loss to amounts ranging from $100,000 to $160,000. Share-Based Payments and Other Equity Transactions Our equity incentive plans are administered by the Compensation Committee of our Board of Directors.
We purchase separate stop-loss insurance, which limits the individual participant claim loss to amounts ranging from $100,000 to $200,000. Share-Based Payments and Other Equity Transactions Our equity incentive plans are administered by the Compensation Committee of our board of directors.
See Note 18 - Commitments and Contingencies to our consolidated financial statements included elsewhere in this report for additional information. Contractual Obligations The following table summarizes our significant obligations outstanding as of September 30, 2023 (in thousands).
See Note 18 - Commitments and Contingencies to our consolidated financial statements included elsewhere in this report for additional information. Contractual Obligations The following table summarizes our significant obligations outstanding as of September 30, 2024 (in thousands).
Investing Activitie s During fiscal 2023, cash used in investing activities was $143.4 million, of which $91.8 million related to acquisitions completed in the period, $97.8 million was invested in property, plant and equipment and $11.4 million was invested in restricted investments.
During fiscal 2023, cash used in investing activities was $143.4 million, of which $91.8 million related to acquisitions completed in the period, $97.8 million was invested in property, plant and equipment and $11.4 million was invested in restricted investments.
Our market capitalization could be impacted because we are a controlled company, which impacts the control premium we apply to the market price of our common stock. One of the largest uncertainties relates to federal, state and local government spending, which management expects to increase in the upcoming years.
Our market capitalization could be impacted because we are a controlled company, which impacts the control premium we apply to the market price of our common stock. One of the largest uncertainties relates to federal, state and local government spending, which management expects to continue to increase in the coming years.
The gain was the result of the disposition of a quarry in North Carolina. In connection with this transaction, we acquired three HMA manufacturing plants and certain related assets located in the Nashville, Tennessee metro area. 31 Table of Contents Interest Expense, Net.
The gain in fiscal 2023 was the result of the disposition of a quarry in North Carolina. In connection with 32 Table of Contents this transaction, we acquired three HMA manufacturing plants and certain related assets located in the Nashville, Tennessee metro area. Interest Expense, Net.
Estimates made in accordance with U.S. GAAP that involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on our financial condition are discussed further below. Revenue Recognition The majority of our public construction contracts are fixed unit price contracts.
Estimates made in accordance with GAAP that involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on our financial condition are discussed further below. 36 Table of Contents Revenue Recognition The majority of our public construction contracts are fixed unit price contracts.
Our capital expenditures are typically made during the same fiscal year in which they are approved. At September 30, 2023, our commitments for capital expenditures were not material to our financial condition or results of operations on a consolidated basis. For fiscal 2024, we expect total capital expenditures to be $90.0 million to $95.0 million.
Our capital expenditures are typically made during the same fiscal year in which they are approved. At September 30, 2024, our commitments for capital expenditures were not material to our financial condition or results of operations on a consolidated basis. For fiscal 2025, we expect total capital expenditures to be $130.0 million to $140.0 million.
Based on our valuation approaches, we determined that our one reporting unit exceeded its carrying value, and thus concluded that the carrying value of goodwill was not impaired at July 1, 2023 or 2022. At September 30, 2023 and 2022, we had goodwill with a carrying amount of $159.3 million and $129.5 million, respectively.
Based on our valuation approaches, we determined that our one reporting unit exceeded its carrying value, and thus concluded that the carrying value of goodwill was not impaired at July 1, 2024 or 2023. At September 30, 2024 and 2023, we had goodwill with a carrying amount of $231.7 million and $159.3 million, respectively.
The increase in gross profit was primarily the result of the 20.1% increase in revenues for fiscal 2023 compared to fiscal 2022 and a higher gross profit margin. The higher gross profit margin was due to (i) efficient utilization of our plants and equipment fleet and (ii) completion of new backlog with more favorable margins. General and Administrative Expenses.
The increase in gross profit was primarily the result of the 16.7% increase in revenues for fiscal 2024 compared to fiscal 2023 and a higher gross profit margin. The higher gross profit margin was due to (i) efficient utilization of our plants and equipment fleet and (ii) completion of new backlog with more favorable margins. General and Administrative Expenses.
At September 30, 2023 and 2022, our fixed charge coverage ratio was 2.56-to-1.00 and 2.56-to-1.00, respectively, and our consolidated leverage ratio was 1.72-to-1.00 and 2.79-to-1.00, respectively. From time to time, we have entered into interest rate swap agreements to hedge against the risk of changes in interest rates.
At September 30, 2024 and 2023, our fixed charge coverage ratio was 3.15-to-1.00 and 2.56-to-1.00, respectively, and our consolidated leverage ratio was 1.81-to-1.00 and 1.72-to-1.00, respectively. From time to time, we have entered into interest rate swap agreements to hedge against the risk of changes in interest rates.
For our indefinite-lived intangible asset impairment test, we performed a qualitative impairment assessment. The qualitative assessment did not identify indicators of impairment, and it was determined that is more likely than not the indefinite-lived name license fair value was more than its carrying amount. Accordingly, no further analysis was required or performed.
For our indefinite-lived intangible asset impairment test, we performed a qualitative impairment assessment. The qualitative assessment did not identify indicators of impairment, and it was determined that is more likely than not the indefinite-lived name license fair value was more than its carrying amount.
Backlog of uncompleted work on contracts under which work was either in progress or had not yet begun was $1.3 billion at September 30, 2023.
Backlog of uncompleted work on contracts under which work was either in progress or had not yet begun was $1.5 billion at September 30, 2024.
However, future cash flows are subject to a number of variables, including the potential impacts of inflation and supply chain constraints, and significant additional capital expenditures will be required to conduct our operations. There can be no assurance that operations and other capital resources will provide sufficient cash to maintain planned or future levels of capital expenditures.
However, future cash flows are subject to a number of variables, including the potential impacts of inflation and supply chain constraints, and significant additional capital expenditures will be required to conduct our operations. Our operations and other capital resources may not provide sufficient cash to maintain planned or future levels of capital expenditures.
The increase in net income was primarily a result of higher gross profit, gain on sale of property, plant and equipment and gain on facility exchange, partially offset by an increase in general and administrative expenses and interest expense, net, all as described above. Adjusted EBITDA and Adjusted EBITDA Margin.
The increase in net income was primarily a result of higher gross profit, partially offset by an increase in general and administrative expenses and interest expense and decreased gains from the facility exchange and sales of property, plant and equipment, all as described above. Adjusted EBITDA and Adjusted EBITDA Margin.
Refer to the Annual Report on Form 10-K for the fiscal year ended September 30, 2022, filed with the SEC on November 22, 2022, for a discussion of results for the fiscal year ended September 30, 2021 (“fiscal 2021”) and a comparison of our financial results for fiscal 2022 to those for fiscal 2021.
Refer to the Annual Report on Form 10-K for the fiscal year ended September 30, 2023, filed with the SEC on November 29, 2023, for a discussion of results for fiscal 2023 and a comparison of our financial results for fiscal 2023 to those for the fiscal year ended September 30, 2022.
The increase in general and administrative expenses for fiscal 2023 compared to fiscal 2022 was the result of (i) a $7.7 million increase attributable to general and administrative expenses associated with the operations of businesses acquired subsequent to September 30, 2022, (ii) a $6.4 million increase in management personnel payroll and benefits, (iii) a $2.8 million increase in equity-based compensation expense, and (iv) a $2.5 million increase in other general and administrative expenses.
The increase in general and administrative expenses for fiscal 2024 compared to fiscal 2023 was the result of (i) an $8.1 million increase attributable to general and administrative expenses associated with the operations of businesses acquired subsequent to September 30, 2023, (ii) a $6.6 million increase in management personnel payroll and benefits, (iii) a $4.3 million increase in share-based compensation expense, and (iv) a $5.6 million increase in other general and administrative expenses.
The increase was primarily the result of a $1.3 million gain on the sale of an excess office building and higher disposals of equipment and components during fiscal 2023. Gain on Facility Exchange . Gain on facility exchange for fiscal 2023 was $5.4 million compared to $0.0 million for fiscal 2022.
The decrease was primarily the result of a $1.3 million gain on the sale of an excess office building and higher disposals of equipment and components during fiscal 2023. Gain on Facility Exchange . There was no gain on facility exchange for fiscal 2024 compared to a gain on facility exchange of $5.4 million for fiscal 2023.
Low bid/no contract backlog was $0.3 billion at September 30, 2023. Business 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.
Low bid/no contract backlog was $0.5 billion at September 30, 2024. 2024 Fiscal Year Business 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.
We received $103.0 million in proceeds from the issuance of long-term debt, net of debt issuance costs and discounts, which was offset by $103.1 million of principal payments on long-term debt and purchase of treasury stock of $0.2 million. During fiscal 2022, cash provided by financing activities was $159.1 million.
We received $103.0 million in proceeds from the issuance of long-term debt, net of debt issuance costs and discounts, which was offset by $103.1 million of principal payments on long-term debt and the purchase of treasury stock of $0.2 million.
Inventories valued on the average cost basis totaled $75.5 million and $64.8 million at September 30, 2023 and 2022, respectively. Inventories valued on the first-in, first-out cost basis totaled $8.5 million and $9.4 million at September 30, 2023 and 2022, respectively.
Inventories valued on the average cost basis totaled $95.8 million and $75.5 million at September 30, 2024 and 2023, respectively. Inventories valued on the first-in, first-out cost basis totaled $10.9 million and $8.5 million at September 30, 2024 and 2023, respectively.
We also derive revenues from the sale of HMA, aggregates and liquid asphalt cement to customers. We recognize revenues derived from projects as we satisfy our performance obligations over time (formerly known as the percentage-of-completion method), measured by the relationship of total cost incurred compared to total estimated contract costs (cost-to-cost input method).
We recognize revenues derived from projects as we satisfy our performance obligations over time (formerly known as the percentage-of-completion method), measured by the relationship of total cost incurred compared to total estimated contract costs (cost-to-cost input method).
Accrued Insurance Cost We carry insurance policies to cover various risks, primarily including general liability, automobile liability and workers’ compensation, under which we are liable to reimburse the insurance company for a portion of each claim paid. Since October 1, 2021, the Captive has retained the first $1,000,000 per claim liability for each claim paid.
Accrued Insurance Cost We carry insurance policies to cover various risks, primarily including general liability, automobile liability and workers’ compensation, under which we are liable to reimburse the insurance company for a portion of each claim paid.
We maintain an allowance for doubtful accounts, which has historically been sufficient to cover accounts that are not collected. 36 Table of Contents Valuation of Long-Lived Assets and Goodwill Long-lived assets, which include property, plant and equipment and acquired intangible assets, such as goodwill, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset, or an asset group, may not be recoverable.
Valuation of Long-Lived Assets and Goodwill Long-lived assets, which include property, plant and equipment and acquired intangible assets, such as goodwill, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset, or an asset group, may not be recoverable.
These amounts were partially offset by $17.7 million of proceeds from the sale of equipment, $37.0 million of proceeds from the facility exchange and $2.9 million of proceeds from the sale of restricted investments.
These amounts were partially offset by $17.7 million of proceeds from the sale of equipment, $37.0 million of proceeds from the facility exchange and $2.9 million of proceeds from the sale of restricted investments. Financing Activities During fiscal 2024, cash provided by financing activities was $126.1 million.
For more information about the Credit Agreement, see Note 11 - Debt to the consolidated financial statements included elsewhere in this report. 33 Table of Contents Capital Requirements and Sources of Liquidity During fiscal 2023 and fiscal 2022, our capital expenditures were approximately $97.8 million and $68.9 million, respectively.
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. Capital Requirements and Sources of Liquidity During fiscal 2024 and fiscal 2023, our capital expenditures were approximately $87.9 million and $97.8 million, respectively.
We confirm that funds have been appropriated by the government project owner prior to commencing work on such projects. While most of our public contracts are subject to termination at the election of the government entity, in the event of any such termination, we are entitled to receive the contract price for completed work and reimbursement of termination-related costs.
While most of our public contracts are subject to termination at the election of the government entity, in the event of any such termination, we are entitled to receive the contract price for completed work and reimbursement of termination-related costs.
The 8.7% increase in revenue in our existing markets was due to strong demand in both public and private work. Gross Profit. Gross profit for fiscal 2023 increased $57.1 million, or 41.0%, to $196.4 million from $139.3 million for fiscal 2022.
The 6.8% increase in revenue in our existing markets was due to strong demand in both public and private work. Gross Profit. Gross profit for fiscal 2024 increased $61.9 million, or 31.5%, to $258.3 million from $196.4 million for fiscal 2023.
Interest expense, net for fiscal 2023 increased $9.6 million, or 125.2%, to $17.3 million compared to $7.7 million for fiscal 2022. The increase in interest expense, net was primarily due to an increase in the average principal debt balance outstanding and higher interest rates during fiscal 2023 compared to fiscal 2022. Provision for Income Taxes.
Interest expense, net for fiscal 2024 increased $1.7 million, or 9.9%, to $19.1 million compared to $17.3 million for fiscal 2023. The increase in interest expense, net was primarily due to an increase in the average principal debt balance outstanding. Provision for Income Taxes. Our effective tax rate was 25.1% for fiscal 2024 and fiscal 2023. Net Income.
Revenues for fiscal 2023 increased $261.9 million, or 20.1%, to $1.6 billion from $1.3 billion for fiscal 2022. The increase included $148.5 million of revenues attributable to acquisitions completed during or subsequent to fiscal 2022 and an increase of approximately $113.4 million of revenues in our remaining markets from contract work and sales of HMA and aggregates to third parties.
Revenues for fiscal 2024 increased $260.3 million, or 16.7%, to $1.8 billion from $1.6 billion for fiscal 2023. The increase included $154.0 million of revenues attributable to acquisitions completed during or subsequent to fiscal 2023 and an increase of approximately $106.3 million of revenues in our existing markets from contract work and sales of HMA and aggregates to third parties.
At September 30, 2023 and 2022, we had $283.8 million and $271.9 million, respectively, of principal outstanding under the Term Loans, $93.1 million and $105.1 million, respectively, of principal outstanding under the Revolving Credit Facility, and availability of $221.1 million and $208.6 million, respectively, under the Revolving Credit Facility, including reduction for outstanding letters of credit.
At September 30, 2024 and 2023, we had $392.2 million and $283.8 million, respectively, of principal outstanding under the Term Loan A, $122.9 million and $93.1 million, respectively, of principal outstanding under the Revolving Credit Facility, and availability of $268.8 million and $222.1 million, respectively, under the Revolving Credit Facility, including reduction for outstanding letters of credit.
Our future success will depend on our ability to access outside sources of capital. We believe that our operating cash flow and available borrowings under the Credit Agreement will be sufficient to fund our operations and planned capital expenditures for at least the next 12 months.
We believe that our operating cash flow and available borrowings under the Term Loan A / Revolver Credit Agreement and the Term Loan B Credit Agreement (together, the “Credit Agreements”) will be sufficient to fund our operations and planned capital expenditures for at least the next 12 months.
We include a construction project in our contract backlog at the time it is awarded and to the extent we believe funding is probable. Our backlog consists of uncompleted work on contracts in progress and contracts for which we have executed a contract but have not commenced the work.
Our backlog consists of uncompleted work on contracts in progress and contracts for which we have executed a contract but have not commenced the work.
Retainage on active contracts is classified as a current asset regardless of the term of the contract and is generally collected within one year of the completion of a contract.
Retainage on active contracts is classified as a current asset regardless of the term of the contract and is generally collected within one year of the completion of a contract. At September 30, 2024 and 2023, contracts receivable included $52.7 million and $53.3 million, respectively, of retainage.
Gain on Sale of Property, Plant and Equipment . Gain on sale of property, plant and equipment for fiscal 2023 increased $3.4 million, or 91.9%, to $7.0 million from $3.7 million for fiscal 2022.
Gain on Sale of Property, Plant and Equipment . Gain on sale of property, plant and equipment for fiscal 2024 decreased $2.6 million, or 36.4%, to $4.5 million from $7.0 million for fiscal 2023.
General and administrative expenses for fiscal 2023 increased $19.4 million, or 18.0%, to $126.9 million from $107.6 million for fiscal 2022.
General and administrative expenses for fiscal 2024 increased $24.6 million, or 19.3%, to $151.5 million from $126.9 million for fiscal 2023.
As a result of the term extension, we no longer view the management fees and expenses paid under the management services agreement as a non-recurring expense. Adjusted EBITDA Margin represents Adjusted EBITDA as a percentage of revenues for each period. These metrics are supplemental measures of our operating performance that are neither required by, nor presented in accordance with, GAAP.
Adjusted EBITDA Margin represents Adjusted EBITDA as a percentage of revenues for each period. These metrics are supplemental measures of our operating performance that are neither required by, nor presented in accordance with, GAAP.
The obligations of our subsidiaries under the Term Loans and the Revolving Credit Facility are secured by a first priority security interest in substantially all of our assets. The Credit Agreement requires us to satisfy certain financial covenants, including a minimum fixed charge coverage ratio of 1.20-to-1.00 and a maximum consolidated leverage ratio of 3.50-to-1.00, subject to certain adjustments.
The Term Loan A / Revolver Credit Agreement requires us to satisfy certain financial covenants, including a minimum fixed charge coverage ratio of 1.20-to-1.00 and a maximum consolidated leverage ratio of 3.50-to-1.00, subject to certain adjustments.
Our intangible assets and liabilities were recognized as a result of certain acquisitions and are generally amortized on a straight-line basis over the estimated useful lives of the assets and liabilities.
Our intangible assets and liabilities were recognized as a result of certain acquisitions and are generally amortized on a straight-line basis over the estimated useful lives of the assets and liabilities. Mineral reserves are depleted in accordance with the units-of-production method as aggregates are extracted, using the initial allocation of cost based on proven and probable reserves.
These expenses consist primarily of salaries and personnel costs for our administration, finance and accounting, legal, information systems, human resources and certain managerial employees. General and administrative expenses also include acquisition expenses, audit, consulting and professional fees, stock-based compensation expense, travel, insurance, office space rental costs, property taxes and other corporate and overhead expenses.
General and administrative expenses also include acquisition expenses, audit, consulting and professional fees, stock-based compensation expense, travel, insurance, office space rental costs, property taxes and other corporate and overhead expenses.
Other Key Performance Indicators — Adjusted EBITDA and Adjusted EBITDA Margin Adjusted EBITDA represents net income before, as applicable from time to time, (i) interest expense, net, (ii) provision (benefit) for income taxes, (iii) depreciation, depletion, accretion and amortization, (iv) equity-based compensation expense, (v) loss on the extinguishment of debt, and (vi) certain management fees and expenses.
These amounts are partially offset by interest income earned on short-term investments of cash balances in excess of our current operating needs. 30 Table of Contents Other Key Performance Indicators — Adjusted EBITDA and Adjusted EBITDA Margin Adjusted EBITDA represents net income before, as applicable from time to time, (i) interest expense, net, (ii) provision (benefit) for income taxes, (iii) depreciation, depletion, accretion and amortization, (iv) share-based compensation expense, (v) loss on the extinguishment of debt, and (vi) expenses associated with non-routine acquisitions.
Off-Balance Sheet Arrangements As of September 30, 2023, the Company had aggregate letters of credit outstanding in the amount of $9.8 million, future purchase commitments for diesel fuel and natural gas of $3.1 million and $0.6 million, respectively, and $2.5 million of minimum royalty payments related to mineral leases at aggregates facilities.
If we are unable to obtain the funds we need, we may not be able to complete acquisitions that may be favorable to us or finance the capital expenditures necessary to conduct our operations. 35 Table of Contents Off-Balance Sheet Arrangements As of September 30, 2024, the Company had aggregate letters of credit outstanding in the amount of $8.3 million, future purchase commitments for diesel fuel and natural gas of $4.0 million and $0.5 million, respectively, and $2.2 million of minimum royalty payments related to mineral leases at aggregates facilities.
How We Assess Performance of Our Business Revenues We derive our revenues predominantly by providing construction products and services for both public and private infrastructure projects, with an emphasis on highways, roads, bridges, airports and commercial and residential sites in the southeastern United States. Our projects represent a mix of federal, state, municipal and private customers.
A cool, wet spring increases drying time on projects, which can delay revenues in the third fiscal quarter, while a warm, dry spring may facilitate earlier project commencement dates. 29 Table of Contents How We Assess Performance of Our Business Revenues We derive our revenues predominantly by providing construction products and services for both public and private infrastructure projects, with an emphasis on highways, roads, bridges, airports and commercial and residential sites in the southeastern United States.
Costs associated with claims are included in the estimated costs to complete the contracts and are treated as project costs when incurred.
Costs associated with claims are included in the estimated costs to complete the contracts and are treated as project costs when incurred. For the majority of our contracts, we receive our final payment when projects are near completion or fully completed.
Credit risk with private owners is minimized because of statutory mechanic’s liens, which give us high priority in the event of lien foreclosures following financial difficulties of private owners.
Credit risk with private customers is minimized because of statutory mechanic’s liens, which give us high priority in the event of lien foreclosures following financial difficulties of private customers. We maintain an allowance for credit losses, which has historically been sufficient to cover accounts that are not collected.
Inventories The Company’s inventories are stated at the lower of cost or net realizable value and are accounted for on an average cost basis or a first-in, first-out cost basis. The cost of inventory includes the cost of material, labor, trucking and other equipment costs associated with procuring and transporting materials to HMA plants for production and delivery to customers.
The cost of inventory includes the cost of material, labor, trucking and other equipment costs associated with procuring and transporting materials to HMA plants for production and delivery to customers.
Our first and second fiscal quarters typically have lower levels of activity due to adverse weather conditions. 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 revenues in the third fiscal quarter, while a warm, dry spring may facilitate earlier project commencement dates.
Our first and second fiscal quarters typically have lower levels of activity due to adverse weather conditions. Our third fiscal quarter varies greatly with spring rains and wide temperature variations.
Also effective October 1, 2021, we became a member of a group captive insurance company that retains the next $550,000 per claim liability for each claim paid. We utilize various 37 Table of Contents primary and excess insurance companies to cover the liability for claims in excess of the retained amounts.
Since October 1, 2021, Construction Partners Risk Management, Inc., a captive insurance company and wholly owned subsidiary of the Company, has retained the first $1,000,000 per claim liability for each claim paid. Also effective October 1, 2021, we became a member of a group captive insurance company that retains the next $550,000 per claim liability for each claim paid.
Public transportation infrastructure projects historically have been a relatively stable portion of state and federal budgets and represent a significant share of the United States construction market. Federal funds are allocated on a state-by-state basis, and each state is required to match a portion of the federal funds that it receives.
Our public projects are funded by federal, state and local governments and include roads, highways, bridges, airports and other forms of infrastructure. Public transportation infrastructure projects historically have been a relatively stable portion of state and federal budgets and represent a significant share of the United States construction market.
At September 30, 2023 and 2022, the aggregate notional value of these interest rate swap agreements was $300.0 million, and the fair value was $26.9 million and $24.7 million, respectively, which is included within other assets on our Consolidated Balance Sheets.
At September 30, 2024 and 2023, the aggregate notional value of these interest rate swap agreements was $300.0 million, and the fair value was $11.6 million and $26.9 million, respectively, which is included within other assets on our Consolidated Balance Sheets. 34 Table of Contents For more information about the Term Loan A / Revolver Credit Agreement, see Note 11 - Debt and Note 27 - Subsequent Events to the consolidated financial statements included elsewhere in this report.
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. Our public projects are funded by federal, state and local governments and include roads, highways, bridges, airports and other forms of infrastructure.
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 throughout the Sunbelt in Alabama, Florida, Georgia, North Carolina, South Carolina, Tennessee and Texas.
Fiscal 2023 Developments Contract Backlog At September 30, 2023, our contract backlog was $1.6 billion. Contract backlog is a financial measure that reflects the dollar value of work that the Company expects to perform in the future.
Contract backlog is a financial measure that reflects the dollar value of work that the Company expects to perform in the future. We include a construction project in our contract backlog at the time it is awarded and to the extent we believe funding is probable.
We have historically relied on cash available through credit facilities, in addition to cash from operations, to finance our working capital requirements and to support our growth. We regularly monitor potential capital sources, including equity and debt markets, in an effort to meet our planned capital expenditures and liquidity requirements.
We regularly monitor potential capital sources, including equity and debt markets, in an effort to meet our planned capital expenditures and liquidity requirements. Our future success will depend on our ability to access outside sources of capital.
Many of the contracts under which we perform work contain retainage provisions. Retainage refers to amounts that we have billed to the customer and the Company has an unconditional right to payment, but are being held for payment by the customer pending satisfactory completion of the project.
Many of the contracts under which we perform work contain retainage provisions. Retainage refers to amounts earned by the Company but held by customers until contracts are near completion or fully completed.
During fiscal 2022, cash used in investing activities was $197.3 million, of which $128.6 million related to acquisitions completed in the period and $68.9 million was invested in property, plant and equipment. These amounts were partially offset by $7.5 million of proceeds from the sale of equipment. Financing Activities During fiscal 2023, cash used in financing activities was $0.3 million.
Investing Activitie s During fiscal 2024, cash used in investing activities was $307.6 million, of which $231.8 million related to acquisitions completed in the period, $87.9 million was invested in property, plant and equipment and $5.5 million was invested in restricted investments.
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.
As a result of these acquisitions, we added eleven asphalt plants and a diverse fleet of equipment and vehicles, as well as skilled construction professionals. For further discussion regarding these transactions, see Note 4 - Business Acquisitions to the consolidated financial statements included elsewhere in this report.
For the Fiscal Year Ended September 30, Change from Fiscal 2022 to Fiscal 2023 2023 2022 Dollars % of Revenues Dollars % of Revenues $ Change % Change Revenues $ 1,563,548 100.0 % $ 1,301,674 100.0 % $ 261,874 20.1 % Cost of revenues 1,367,163 87.4 % 1,162,372 89.3 % 204,791 17.6 % Gross profit 196,385 12.6 % 139,302 10.7 % 57,083 41.0 % General and administrative expenses (126,947) (8.1) % (107,562) (8.3) % (19,385) 18.0 % Gain on sale of property, plant and equipment 7,048 0.5 % 3,673 0.3 % 3,375 91.9 % Gain on facility exchange 5,389 0.3 % — — % 5,389 — % Operating income 81,875 5.3 % 35,413 2.7 % 46,462 131.2 % Interest expense, net (17,346) (1.1) % (7,701) (0.6) % (9,645) 125.2 % Other income 875 — % 600 0.1 % 275 45.8 % Income before provision for income taxes and earnings from investment in joint venture 65,404 4.2 % 28,312 2.2 % 37,092 131.0 % Provision for income taxes 16,403 1.1 % 6,915 0.5 % 9,488 137.2 % Earnings (loss) from investment in joint venture — — % (21) (0.1) % 21 (100.0) % Net income $ 49,001 3.1 % $ 21,376 1.6 % $ 27,625 129.2 % Adjusted EBITDA $ 174,095 11.1 % $ 111,173 8.5 % $ 62,922 56.6 % Revenues.
For the Fiscal Year Ended September 30, Change from Fiscal 2023 to Fiscal 2024 2024 2023 Dollars % of Revenues Dollars % of Revenues $ Change % Change Revenues $ 1,823,889 100.0 % $ 1,563,548 100.0 % $ 260,341 16.7 % Cost of revenues 1,565,635 85.8 % 1,367,163 87.4 % 198,472 14.5 % Gross profit 258,254 14.2 % 196,385 12.6 % 61,869 31.5 % General and administrative expenses (151,497) (8.3) % (126,947) (8.1) % (24,550) 19.3 % Gain on sale of property, plant and equipment 4,483 0.2 % 7,048 0.5 % (2,565) (36.4) % Gain on facility exchange — — % 5,389 0.3 % (5,389) (100.0) % Operating income 111,240 6.1 % 81,875 5.3 % 29,365 35.9 % Interest expense, net (19,071) (1.0) % (17,346) (1.1) % (1,725) 9.9 % Other (expense) income (70) — % 875 — % (945) (108.0) % Income before provision for income taxes and earnings from investment in joint venture 92,099 5.1 % 65,404 4.2 % 26,695 40.8 % Provision for income taxes 23,161 1.3 % 16,403 1.0 % 6,758 41.2 % Loss from investment in joint venture (3) — % — — % (3) — % Net income $ 68,935 3.8 % $ 49,001 3.1 % $ 19,934 40.7 % Adjusted EBITDA $ 220,573 12.1 % $ 172,609 11.0 % $ 47,964 27.8 % Revenues.
Federal highway spending uses funds predominantly from the Highway Trust Fund, which derives its revenues from fuel taxes and other user fees. In addition to public infrastructure projects, we provide a wide range of large site work construction and HMA paving services to private construction customers, including commercial and residential developers and local businesses.
In addition to public infrastructure projects, we provide a wide range of large site work construction and HMA paving services to private construction customers, including commercial and residential developers and local businesses. Recent Developments Contract Backlog At September 30, 2024, our contract backlog was $2.0 billion.
Periods commencing subsequent to September 30, 2023 will not include an adjustment for management fees and expenses, which have historically related to our management services agreement with an affiliate of SunTx. Effective October 1, 2023, the term of the management services agreement was extended to October 1, 2028.
(2) In periods commencing prior to September 30, 2023, we historically included within the definition of Adjusted EBITDA an adjustment for management fees and expenses related to our management services agreement with an affiliate of SunTx Capital Partners, a member of our control group.
We received $167.3 million in proceeds on long-term debt, net of debt issuance costs and discounts, which was partially offset by $8.1 million of principal payments on long-term debt. Credit Agreement We and each of our subsidiaries are parties to the Credit Agreement, which provides for the Term Loans and the Revolving Credit Facility.
We received $210.2 million in proceeds from the issuance of long-term debt, net of debt issuance costs and discounts, which was partially offset by $72.8 million of principal payments on long-term debt and purchase of treasury stock of $11.3 million. During fiscal 2023, cash used in financing activities was $0.3 million.
Potential differences may include differences in capital structures, tax positions and the age and book depreciation of intangible and tangible assets. 29 Table of Contents The following table presents a reconciliation of net income, the most directly comparable measure calculated in accordance with GAAP, to Adjusted EBITDA and the calculation of Adjusted EBITDA Margin for the periods presented (in thousands, except percentages): For the Fiscal Year Ended September 30, 2023 2022 Net income $ 49,001 $ 21,376 Interest expense, net 17,346 7,701 Provision for income taxes 16,403 6,915 Depreciation, depletion, accretion and amortization 79,100 65,730 Equity-based compensation expense 10,759 8,000 Management fees and expenses (1) 1,486 1,451 Adjusted EBITDA $ 174,095 $ 111,173 Revenues $ 1,563,548 $ 1,301,674 Adjusted EBITDA Margin 11.1 % 8.5 % (1) Reflects fees and reimbursement of certain out-of-pocket expenses under a management services agreement with SunTx (see Note 17 - Related Parties to the consolidated financial statements included elsewhere in this report). 30 Table of Contents Results of Operations — Fiscal Year Ended September 30, 2023 Compared to Fiscal Year Ended September 30, 2022 The following table sets forth selected financial data for the fiscal years ended September 30, 2023 (“fiscal 2023”) and September 30, 2022 (“fiscal 2022”) (in thousands, except percentages).
The following table presents a reconciliation of net income, the most directly comparable measure calculated in accordance with GAAP, to Adjusted EBITDA and the calculation of Adjusted EBITDA Margin for the periods presented (in thousands, except percentages): For the Fiscal Year Ended September 30, 2024 2023 (2) Net income $ 68,935 $ 49,001 Interest expense, net 19,071 17,346 Provision for income taxes 23,161 16,403 Depreciation, depletion, accretion and amortization 92,920 79,100 Share-based compensation expense 15,031 10,759 Acquisition-related expenses (1) 1,455 — Adjusted EBITDA $ 220,573 $ 172,609 Revenues $ 1,823,889 $ 1,563,548 Adjusted EBITDA Margin 12.1 % 11.0 % (1) Reflects expenses associated with the Lone Star Acquisition, which management views as a non-routine acquisition.
Additional capital may not be available on acceptable terms or at all. If we are unable to obtain the funds we need, we may not be able to complete acquisitions that may be favorable to us or finance the capital expenditures necessary to conduct our operations.
Additional capital may not be available on acceptable terms or at all.
At September 30, 2023 and 2022, contracts receivable included $53.3 million and $44.3 million, respectively, of retainage, which was being contractually withheld by customers until satisfactory completion of the associated contracts. Because the majority of our construction contracts are entered into with federal, state or municipal government customers, credit risk is minimal.
Because the majority of our construction contracts are entered into with federal, state or municipal government customers, credit risk is minimal. We confirm that funds have been appropriated by the government project owner prior to commencing work on such projects.
Adjusted EBITDA and Adjusted EBITDA Margin were $174.1 million and 11.1%, respectively, for fiscal 2023, compared to $111.2 million and 8.5%, respectively, for fiscal 2022.
Adjusted EBITDA and Adjusted EBITDA Margin were $220.6 million and 12.1%, respectively, for fiscal 2024, compared to $172.6 million and 11.0%, respectively, for fiscal 2023. The increase in Adjusted EBITDA and Adjusted EBITDA Margin resulted primarily from a $19.9 million increase in net income and a $13.8 million increase in depreciation, depletion, accretion and amortization.
Removed
For further discussion regarding these transactions, see Note 4 - Business Acquisitions to the consolidated financial statements included elsewhere in this report. 27 Table of Contents 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.
Added
Federal funds are allocated on a state-by-state basis, and each state is required to match a portion of the federal funds that it receives. Federal highway spending uses funds predominantly from the Highway Trust Fund, which derives its revenues from fuel taxes and other user fees.
Removed
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.
Added
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 the 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.
Removed
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.
Added
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.
Removed
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. Seasonality The activity of our business fluctuates due to seasonality because our business is primarily conducted outdoors.
Added
Wheeler, in his capacity as the selling unit holders’ representative thereunder) and (ii) 3.0 million shares of our Class A common stock.
Removed
Mineral reserves are depleted in accordance with the units-of-production method as aggregates are extracted, using the initial allocation of cost based on proven and probable reserves. 28 Table of Contents General and Administrative Expenses General and administrative expenses include costs related to our operational offices that are not allocated to direct contract costs and expenses related to our corporate offices.
Added
In addition, we agreed to (i) pay cash to the selling unit holders in 28 Table of Contents 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 (ii) 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.
Removed
These amounts are partially offset by interest income earned on short-term investments of cash balances in excess of our current operating needs.
Added
The cash paid at closing was funded from the proceeds of the Term Loan B (as defined below). For more information about the Lone Star Acquisition, see Note 27 - Subsequent Events to the consolidated financial statements included elsewhere in this report.

… 41 more changes not shown on this page.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

7 edited+1 added−10 removed0 unchanged
Biggest changeInterest Rate Risk We are exposed to interest rate risk on certain of our short- and long-term debt obligations used to finance our operations and acquisitions. We have 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.
Biggest changeWe have 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. From time to time, we use derivative instruments as hedges against the impact of interest rate changes on future earnings and cash flows.
The following table presents the future principal payment obligations, interest payments, and fair values associated with the Company’s debt instruments assuming the Company’s actual level of variable rate debt as of September 30, 2023 (in thousands).
The following table presents the future principal payment obligations, interest payments, and fair values associated with the Company’s debt instruments assuming the Company’s actual level of variable rate debt as of September 30, 2024 (in thousands).
Holding other factors constant and absent the interest rate swap agreements described above, a hypothetical 1% change in our borrowing rates would result in a $3.8 million change in our annual interest expense based on our variable rate debt outstanding at September 30, 2023.
Holding other factors constant and absent the interest rate swap agreements described above, a hypothetical 1% change in our borrowing rates would result in a $5.2 million change in our annual interest expense based on our variable rate debt outstanding at September 30, 2024.
The notional amount of the Company’s outstanding interest rate swap contract at September 30, 2023 was $300.0 million. The maturity date of this swap is June 30, 2027, and the fair value of the outstanding swap contract was $26.9 million as of September 30, 2023.
The notional amount of the Company’s outstanding interest rate swap contract at September 30, 2024 was $300.0 million. The maturity date of this swap is June 30, 2027, and the fair value of the outstanding swap contract was $11.6 million as of September 30, 2024.
For the Fiscal Year Ending September 30, Fair 2024 2025 2026 2027 Thereafter Total Value Debt obligations Term loan $ 15,000 $ 18,750 $ 22,500 $ 227,500 $ — $ 283,750 $ 283,750 Revolving credit facility — — — 93,100 — 93,100 93,100 Interest payments (1) 25,726 24,654 23,192 16,371 — (1) Represents projected interest payments using the Company’s September 2023 SOFR-based floating rate of 6.93%.
For the Fiscal Year Ending September 30, Fair 2025 2026 2027 Thereafter Total Value Debt obligations Term Loan A $ 26,563 $ 31,875 $ 333,750 $ — $ 392,188 $ 392,188 Revolving Credit Facility — — 122,850 — 122,850 122,850 Interest payments (1) 33,406 31,435 22,196 — (1) Represents projected interest payments using the Company’s September 2024 SOFR-based floating rate of 6.60%.
From time to time, we use derivative instruments as hedges against the impact 38 Table of Contents of interest rate changes on future earnings and cash flows. We do not enter into such derivative instruments for speculative or trading purposes. At September 30, 2023, we had a total of $376.9 million of variable rate borrowings outstanding.
We do not enter into such derivative instruments for speculative or trading purposes. 39 Table of Contents At September 30, 2024, we had a total of $515.0 million of variable rate borrowings outstanding.
See also Note 20 - Fair Value Measurements and Note 21 - Investments in Derivative Instruments to the consolidated financial statements included in this report. Inflation Risk We are subject to the effects of inflation through wage pressures, increases in the cost of raw materials used to produce HMA, and increases in other items, such as fuel, concrete and steel.
See also Note 20 - Fair Value Measurements and Note 21 - Investments in Derivative Instruments to the consolidated financial statements included in this report. 40 Table of Contents
Removed
Item 7A. Quantitative and Qualitative Disclosures About Market Risk. Commodity Price Risk We are subject to commodity price risk with respect to price changes in liquid asphalt and energy, including fossil fuels and electricity for aggregates and asphalt paving mix production, natural gas for HMA production and diesel fuel for distribution vehicles and production-related mobile equipment.
Added
Item 7A. Quantitative and Qualitative Disclosures About Market Risk. Interest Rate Risk We are exposed to interest rate risk on certain of our short- and long-term debt obligations used to finance our operations and acquisitions.
Removed
In order to manage or reduce commodity price risk, we monitor the costs of these commodities at the time of bid and price them into our contracts accordingly. Furthermore, liquid asphalt escalator provisions in most of our public contracts, and in some of our private and commercial contracts, limit our exposure to price fluctuations in this commodity.
Removed
In addition, we enter into various firm purchase commitments, with terms generally less than 18 months, for certain raw materials. Our risk management activities also include the use of financial derivative instruments. We have entered into fuel swap and natural gas swap contracts to mitigate the financial impact of fluctuations in commodity prices.
Removed
We do not enter into commodity swap contracts for speculative or trading purposes. These fuel swap and natural gas swap contracts provide a fixed price for less than 50% of our estimated fuel and natural gas usage for fiscal years 2024 and 2025.
Removed
The table below provides information about the Company’s fuel swap and natural gas swap contracts that are sensitive to changes in commodity prices as of September 30, 2023.
Removed
Carrying Amount Fair Value Fuel swap contracts (1) Contract volumes (1,000 gallons) 378 Weighted average price (per gallon) 2.71 Contract amount (in thousands) $ 204 $ 204 Natural gas swap contracts (1) Contract volumes (1,000 MMBTU) 10 Weighted average price (per MMBTU) 4.74 Contract amount (in thousands) $ (20) $ (20) (1) See also Note 20 - Fair Value Measurements and Note 21 - Investments in Derivative Instruments to the consolidated financial statements included in this report.
Removed
In recent years, inflation, supply chain and upward wage pressures have had a significant impact on the global economy, including the construction industry in the United States.
Removed
While it is impossible to fully eliminate the impact of these factors, we seek to recover increasing costs by obtaining higher prices for our products or by including the anticipated price increases in our bids.
Removed
Due to the relatively short-term duration of our construction contracts, we are generally able to reduce our exposure to price increases on new contracts, but we are limited in our ability to pass through increased costs for projects already in our backlog.
Removed
Going forward, continued cost inflation in these areas may require further price adjustments to maintain profit margin, and any price increases may have a negative effect on demand. 39 Table of Contents

Other ROAD 10-K year-over-year comparisons