Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
x☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 20192020
OR
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 001-38479
Construction Partners, Inc.
(Exact Name of Registrant as Specified in its Charter)
Delaware26-0758017
(State or other jurisdiction of

incorporation or organization)
(I.R.S. Employer

Identification No.)
290 Healthwest Drive, Suite 2
Dothan, Alabama
36303
(Address of principal executive offices)(Zip Code)
Registrant’s telephone number, including area code: (334) 673-9763
Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Class A common stock, par value $0.001 per shareROADThe Nasdaq Stock Market LLC
(Nasdaq Global Select Market)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x☒    No   ☒☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  x☒    No  ☒☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large“large accelerated filer", "accelerated filer", "smallerfiler,” “accelerated filer,” “smaller reporting company",company,” and "emerging“emerging growth company"company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer☐Accelerated filer☐☒
Non-accelerated filerx☐Smaller reporting companyx☒
Emerging growth companyx☒  
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  x☒
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes  ☐    No  x☒
Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934
Title of each classTrading Symbol(s)Name of each exchange on which registered
Class A Common Stock, par value $0.001 per shareROADThe Nasdaq Stock Market LLC
As of May 10, 2019,6, 2020, the registrant had 31,806,31332,805,418 shares of Class A common stock, $0.001 par value, and 19,608,30618,976,327 shares of Class B common stock, $0.001 par value, outstanding.



CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained in this Quarterly Report on Form 10-Q constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"“Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"“Exchange Act”), including statements related to future events, business strategy, future performance, future operations, backlog, financial position, estimated revenues and losses, projected costs, prospects, plans and objectives of management. All statements other than statements of historical fact may be forward-looking statements. Forward-looking statements are often, but not always, identified by the use of words such as "seek," "anticipate," "plan," "continue," "estimate," "expect," "may," "will," "project," "predict," "potential," "targeting," "intend," "could," "might," "should," "believe"“seek,” “anticipate,” “plan,” “continue,” “estimate,” “expect,” “may,” “will,” “project,” “predict,” “potential,” “targeting,” “intend,” “could,” “might,” “should,” “believe,” “outlook” and variations of such words or their negative and similar expressions or their negative.expressions. Forward-looking statements should not be read as a guarantee of future performance or results, and willmay not necessarily be accurate indications of the times at, or by, which such performance or results will be achieved. Forward-looking statements are based on management'smanagement’s belief, based on currently available information, as to the outcome and timing of future events. These statements involve estimates, assumptions, known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those expressed in such forward-looking statements. When evaluating forward-looking statements, you should consider the risk factors and other cautionary statements described in this Quarterly Report on Form 10-Q and under the heading "Risk Factors"“Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended September 30, 2018.2019. We believe the expectations reflected in the forward-looking statements contained in this Quarterly Report on Form 10-Qreport are reasonable, but no assurance can be given that these expectations will prove to be correct. Forward-looking statements should not be unduly relied upon.
Important factors that could cause actual results or events to differ materially from those expressed in forward-looking statements include, but are not limited to:
•declines in public infrastructure construction and reductions in government funding, including the funding by transportation authorities and other state and local agencies;
•risks related to our operating strategy;
•competition for projects in our local markets;
•risks associated with our capital-intensive business;
•government inquiries, requirements and initiatives, including those related to funding for public or infrastructure construction, compliance with construction contracting requirements and their laws and regulations, land usage, and environmental, health and safety matters;matters, and government contracting requirements and other laws and regulations;
•unfavorable economic conditions and restrictive financing markets;
•our ability to successfully identify, manage and integrate acquisitions;
•our ability to obtain sufficient bonding capacity to undertake certain projects;
•our ability to accurately estimate the overall risks, requirements or costs when we bid on or negotiate contracts that are ultimately awarded to us;
•the cancellation of a significant number of contracts or our disqualification from bidding for new contracts;
•risks related to adverse weather conditions;
•our substantial indebtedness and the restrictions imposed on us by the terms thereof;
•our ability to maintain favorable relationships with third parties that supply us with equipment and essential supplies;
•our ability to retain key personnel and maintain satisfactory labor relations;
•property damage results of litigation disputes and other claims and insurance coverage issues;
•the outcome of litigation or disputes, including employment-related, workers’ compensation and breach of contract claims;
•risks related to our information technology systems and infrastructure; andinfrastructure, including cybersecurity incidents;
•our ability to remediate the material weaknesses in internal control over financial reporting identified in preparing our financial statements for the fiscal years ended September 30, 2018 and September 30, 2017 and to subsequently maintain effective internal control over financial reporting.reporting;
•a pandemic, such as the pandemic related to the novel strain of coronavirus known as COVID-19 (“COVID-19”), and the measures that federal, state and local governments take to address it, which may exacerbate one or more of the above-mentioned risks and significantly disrupt or prevent us from operating our business for an extended period; and
•other events outside of our control.
These factors are not necessarily all of the important factors that could cause actual results or events to differ materially from those expressed in the forward-looking statements. Other unknown or unpredictable factors could also cause actual results or


events to differ materially from those expressed in the forward-looking statements. Our future results will depend upon various other risks and uncertainties, including those described in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K for the fiscal year ended September 30, 2018.2019. All forward-looking statements attributable to us are qualified in their entirety by this cautionary statement. Forward-looking statements speak only as of the date hereof. We undertake no obligation to update

or revise any forward-looking statements after the date on which any such statement is made, whether as a result of new information, future events or otherwise, except as required by law.


Table of Contents
TABLE OF CONTENTS


Risk Factors
29
Item 2.




Table of Contents
PART I - FINANCIAL INFORMATION

Item 1. Financial Statements


CONSTRUCTION PARTNERS, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
 March 31, September 30,March 31,September 30,
 2019 201820202019
 (unaudited)  (unaudited)
ASSETS    ASSETS
Current assets:    Current assets:
Cash and cash equivalents $61,911
 $99,137
Cash and cash equivalents$53,794  $80,619  
Contracts receivable including retainage, net 105,541
 120,291
Contracts receivable including retainage, net122,897  139,882  
Costs and estimated earnings in excess of billings on uncompleted contracts 12,595
 9,334
Costs and estimated earnings in excess of billings on uncompleted contracts16,101  12,030  
Inventories 33,042
 24,556
Inventories42,010  34,291  
Prepaid expenses and other current assets 17,124
 14,137
Prepaid expenses and other current assets11,547  13,144  
Total current assets 230,213
 267,455
Total current assets246,349  279,966  
    
Property, plant and equipment, net 197,869
 178,692
Property, plant and equipment, net240,083  205,870  
Operating lease right-of-use assetsOperating lease right-of-use assets8,569  —  
Goodwill 36,968
 32,919
Goodwill46,348  38,546  
Intangible assets, net 3,306
 3,735
Intangible assets, net3,329  3,434  
Investment in joint venture 398
 1,659
Investment in joint venture109  496  
Other assets 6,151
 10,270
Other assets1,952  2,284  
Deferred income taxes, net 1,580
 1,580
Deferred income taxes, net1,173  1,173  
Total assets $476,485
 $496,310
Total assets$547,912  $531,769  
LIABILITIES AND STOCKHOLDERS' EQUITY    
LIABILITIES AND STOCKHOLDERS’ EQUITYLIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:    Current liabilities:
Accounts payable $47,599
 $63,510
Accounts payable$57,990  $70,442  
Billings in excess of costs and estimated earnings on uncompleted contracts 34,657
 38,738
Billings in excess of costs and estimated earnings on uncompleted contracts29,540  31,115  
Current portion of operating lease liabilities Current portion of operating lease liabilities2,722  —  
Current maturities of debt 14,836
 14,773
Current maturities of debt8,457  7,538  
Accrued expenses and other current liabilities 15,559
 17,520
Accrued expenses and other current liabilities15,699  19,078  
Total current liabilities 112,651
 134,541
Total current liabilities114,408  128,173  
Long-term liabilities:    Long-term liabilities:
Long-term debt, net of current maturities 40,701
 48,115
Long-term debt, net of current maturities57,096  42,458  
Operating lease liabilities, net of current portion Operating lease liabilities, net of current portion6,058  —  
Deferred income taxes, net 8,890
 8,890
Deferred income taxes, net11,480  11,480  
Other long-term liabilities 5,408
 5,295
Other long-term liabilities7,759  6,108  
Total long-term liabilities 54,999
 62,300
Total long-term liabilities82,393  60,046  
Total liabilities 167,650
 196,841
Total liabilities196,801  188,219  
Commitments and contingencies 
 
Commitments and contingencies
Stockholders' equity:    
Preferred stock, par value $0.001; 10,000,000 shares authorized and no shares issued and outstanding at March 31, 2019 and September 30, 2018 —
 —
Class A common stock, par value $0.001; 400,000,000 shares authorized, 11,950,000 issued and outstanding at March 31, 2019 and September 30, 2018 12
 12
Class B common stock, par value $0.001; 100,000,000 shares authorized, 42,387,571 issued and 39,464,619 outstanding at March 31, 2019 and September 30, 2018 42
 42
Stockholders’ equity:Stockholders’ equity:
Preferred stock, par value $0.001; 10,000,000 shares authorized at March 31, 2020 and September 30, 2019 and 0 shares issued and outstandingPreferred stock, par value $0.001; 10,000,000 shares authorized at March 31, 2020 and September 30, 2019 and 0 shares issued and outstanding—  —  
Class A common stock, par value $0.001; 400,000,000 shares authorized, 32,705,418 shares issued and outstanding at March 31, 2020, and 32,597,736 shares issued and outstanding at September 30, 2019Class A common stock, par value $0.001; 400,000,000 shares authorized, 32,705,418 shares issued and outstanding at March 31, 2020, and 32,597,736 shares issued and outstanding at September 30, 201933  33  
Class B common stock, par value $0.001; 100,000,000 shares authorized, 21,999,279 shares issued and 19,076,327 outstanding at March 31, 2020, and 22,106,961 shares issued and 19,184,009 shares outstanding at September 30, 2019Class B common stock, par value $0.001; 100,000,000 shares authorized, 21,999,279 shares issued and 19,076,327 outstanding at March 31, 2020, and 22,106,961 shares issued and 19,184,009 shares outstanding at September 30, 201922  22  
Additional paid-in capital 242,493
 242,493
Additional paid-in capital244,237  243,452  
Treasury stock, at cost (15,603) (15,603)
Treasury stock, at cost, 2,922,952 shares of Class B common stock, par value $0.001Treasury stock, at cost, 2,922,952 shares of Class B common stock, par value $0.001(15,603) (15,603) 
Retained earnings 81,891
 72,525
Retained earnings122,422  115,646  
Total stockholders' equity 308,835
 299,469
Total liabilities and stockholders' equity $476,485
 $496,310
Total stockholders’ equityTotal stockholders’ equity351,111  343,550  
Total liabilities and stockholders’ equityTotal liabilities and stockholders’ equity$547,912  $531,769  
    
See notes to unaudited consolidated financial statements.statements (unaudited).

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CONSTRUCTION PARTNERS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(unaudited in thousands, except share and per share data)
 For the Three Months Ended March 31, For the Six Months Ended March 31,For the Three Months Ended March 31,For the Six Months Ended March 31,
 2019 2018 2019 20182020201920202019
Revenues $164,304
 $118,899
 $318,631
 $269,320
Revenues$168,679  $164,304  $343,993  $318,631  
Cost of revenues 144,503
 105,150
 277,702
 232,773
Cost of revenues147,708  144,503  299,265  277,702  
Gross profit 19,801
 13,749
 40,929
 36,547
Gross profit20,971  19,801  44,728  40,929  
General and administrative expenses (14,771) (13,358) (29,202) (25,784)General and administrative expenses(16,821) (14,771) (33,934) (29,202) 
Settlement income —
 14,803
 —
 14,803
Gain on sale of equipment, net 693
 886
 1,027
 1,031
Gain on sale of equipment, net435  693  744  1,027  
Operating income 5,723
 16,080
 12,754
 26,597
Operating income4,585  5,723  11,538  12,754  
Interest expense, net (379) (253) (894) (550)Interest expense, net(1,834) (379) (2,115) (894) 
Other income (expense), net 123
 (39) 106
 (60)
Other income (expense)Other income (expense)(753) 123  (688) 106  
Income before provision for income taxes and earnings from investment in joint venture 5,467
 15,788
 11,966
 25,987
Income before provision for income taxes and earnings from investment in joint venture1,998  5,467  8,735  11,966  
Provision for income taxes 1,488
 4,770
 3,139
 3,973
Provision for income taxes531  1,488  1,850  3,139  
Earnings from investment in joint venture 233
 230
 539
 230
Earnings from investment in joint venture70  233  113  539  
Net income $4,212
 $11,248
 $9,366
 $22,244
Net income$1,537  $4,212  $6,998  $9,366  
        
Net income per share attributable to common stockholders:        Net income per share attributable to common stockholders:
Basic $0.08
 $0.27
 $0.18
 $0.53
Basic$0.03  $0.08  $0.14  $0.18  
Diluted $0.08
 $0.27
 $0.18
 $0.53
 Diluted$0.03  $0.08  $0.14  $0.18  
        
Weighted average number of common shares outstanding:        Weighted average number of common shares outstanding:
Basic 51,414,619
 41,717,024
 51,414,619
 41,704,071
Basic51,489,211  51,414,619  51,489,211  51,414,619  
Diluted 51,414,619
 41,910,122
 51,414,619
 41,874,442
 Diluted51,619,403  51,414,619  51,612,340  51,414,619  
        
See notes to unaudited consolidated financial statements.statements (unaudited).



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CONSTRUCTION PARTNERS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(unaudited in thousands, except share data)

 Class A Common Stock Class B Common Stock 
Additional
Paid-in
Capital
 
Treasury
Stock
 
Retained
Earnings
 
Total
Stockholders'
Equity
 Shares Amount Shares Amount    
September 30, 201811,950,000
 $12
 42,387,571
 $42
 $242,493
 $(15,603) $72,525
 $299,469
Net income—
 —
 —
 —
 —
 —
 5,154
 5,154
December 31, 201811,950,000
 12
 42,387,571
 42
 242,493
 (15,603) 77,679
 304,623
Net income—
 —
 —
 —
 —
 —
 4,212
 4,212
March 31, 201911,950,000
 $12
 42,387,571
 $42
 $242,493
 $(15,603) $81,891
 $308,835
                
For the six months ended March 31, 2020
Class A Common StockClass B Common Stock
Additional
Paid-in
Capital
Treasury
Stock
Retained
Earnings
Total Stockholders’ Equity
SharesAmountSharesAmount
September 30, 201932,597,736  $33  22,106,961  $22  $243,452  $(15,603) $115,646  $343,550  
Net income—  —  —  —  —  —  5,461  5,461  
Equity-based compensation expense—  —  —  —  395  —  —  395  
Conversion of Class B common stock to Class A common stock107,682  —  (107,682) —  —  —  —  —  
Effect of adopting ASU Topic 842 (See Note 3)—  —  —  —  —  —  (222) (222) 
December 31, 201932,705,418  $33  21,999,279  $22  $243,847  $(15,603) $120,885  $349,184  
Net income—  —  —  —  —  —  1,537  1,537  
Equity-based compensation expense—  —  —  —  390  —  —  390  
March 31, 202032,705,418  $33  21,999,279  $22  $244,237  $(15,603) $122,422  $351,111  



 Common Stock Additional
Paid-in
Capital		 Treasury
Stock		 Retained
Earnings		 Total
Stockholders'
Equity
 Shares Amount    
September 30, 201744,987,575
 $45
 $142,385
 $(11,983) $21,734
 $152,181
Net income—
 —
 —
 —
 10,996
 10,996
December 31, 201744,987,575
 45
 142,385
 (11,983) 32,730
 163,177
Equity-based compensation expense—
 —
 604
 —
 —
 604
Issuance of restricted shares from treasury—
 —
 (453) 458
 —
 5
Net income—
 —
 —
 —
 11,248
 11,248
March 31, 201844,987,575
 $45
 $142,536
 $(11,525) $43,978
 $175,034
            


For the six months ended March 31, 2019
Class A Common StockClass B Common StockAdditional
Paid-in
Capital		Treasury
Stock		Retained
Earnings		Total
Stockholders’
Equity
SharesAmountSharesAmount
September 30, 201811,950,000  $12  42,387,571  $42  $242,493  $(15,603) $72,525  $299,469  
Net income—  —  —  —  —  —  5,154  5,154  
December 31, 201811,950,000  $12  42,387,571  $42  $242,493  $(15,603) $77,679  $304,623  
Net income—  —  —  —  —  —  4,212  4,212  
March 31, 201911,950,000  $12  42,387,571  $42  $242,493  $(15,603) $81,891  $308,835  
See notes to unaudited consolidated financial statements.statements (unaudited).

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CONSTRUCTION PARTNERS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited in thousands)
 For the Six Months Ended March 31,For the Six Months Ended March 31,
 2019 201820202019
Cash flows from operating activities:    Cash flows from operating activities:
Net income $9,366
 $22,244
Net income$6,998  $9,366  
Adjustments to reconcile net income to net cash provided by operating activities:    Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, depletion and amortization of long-lived assets 14,639
 11,308
Depreciation, depletion and amortization of long-lived assets19,031  14,639  
Amortization of deferred debt issuance costs and debt discount 55
 39
Amortization of deferred debt issuance costs and debt discount74  55  
Loss on derivative instrumentsLoss on derivative instruments2,263  331  
Provision for bad debt 290
 290
Provision for bad debt305  290  
Gain on sale of equipment, net (1,027) (1,031)
Gain on sale of equipmentGain on sale of equipment(744) (1,027) 
Equity-based compensation expense —
 604
Equity-based compensation expense785  —  
Earnings from investment in joint venture (539) (230)Earnings from investment in joint venture(113) (539) 
Deferred income taxes —
 (3,470)
Changes in operating assets and liabilities:    
Other non-cash adjustments Other non-cash adjustments(11) —  
Changes in operating assets and liabilities, net of acquisition:Changes in operating assets and liabilities, net of acquisition:
Contracts receivable including retainage, net 14,460
 44,811
Contracts receivable including retainage, net16,680  14,460  
Costs and estimated earnings in excess of billings on uncompleted contracts (3,261) (5,540)Costs and estimated earnings in excess of billings on uncompleted contracts(4,071) (3,261) 
Inventories (7,965) (2,342)Inventories(4,632) (7,965) 
Other current assets (2,987) (8,090)
Prepaid expenses and other current assetsPrepaid expenses and other current assets1,597  (2,987) 
Other assets 4,119
 (11,960)Other assets332  3,865  
Accounts payable (15,911) (15,078)Accounts payable(12,452) (15,911) 
Billings in excess of costs and estimated earnings on uncompleted contracts (4,081) (1)Billings in excess of costs and estimated earnings on uncompleted contracts(1,575) (4,081) 
Accrued expenses and other current liabilities (1,972) (3,247)Accrued expenses and other current liabilities(3,967) (1,972) 
Other long-term liabilities 113
 (183)Other long-term liabilities(24) 36  
Net cash provided by operating activities, net of acquisitions 5,299
 28,124
Net cash provided by operating activities, net of acquisitionNet cash provided by operating activities, net of acquisition20,476  5,299  
Cash flows from investing activities:    Cash flows from investing activities:
Purchases of property, plant and equipment (19,802) (21,966)Purchases of property, plant and equipment(34,512) (19,802) 
Proceeds from sale of equipment 2,585
 2,487
Proceeds from sale of equipment1,419  2,585  
Business acquisition, net of cash acquired (8,854) —
Business acquisitions, net of cash acquiredBusiness acquisitions, net of cash acquired(30,191) (8,854) 
Acquisition of liquid asphalt terminal assets (10,848) —
Acquisition of liquid asphalt terminal assets—  (10,848) 
Investment in joint venture —
 (400)
Distributions received from investment in joint venture 1,800
 —
Distributions received from investment in joint venture500  1,800  
Net cash used in investing activities (35,119) (19,879)Net cash used in investing activities(62,784) (35,119) 
Cash flows from financing activities:    Cash flows from financing activities:
Repayments on revolving credit facility —
 (5,000)
Proceeds from issuance of long-term debt, net of debt issuance costs and discountProceeds from issuance of long-term debt, net of debt issuance costs and discount24,777  —  
Repayments of long-term debt (7,406) (5,000)Repayments of long-term debt(9,294) (7,406) 
Proceeds from reissuance of treasury stock —
 5
Net cash used in financing activities (7,406) (9,995)
Net cash provided by (used in) financing activitiesNet cash provided by (used in) financing activities15,483  (7,406) 
Net change in cash and cash equivalents (37,226) (1,750)Net change in cash and cash equivalents(26,825) (37,226) 
Cash and cash equivalents:    Cash and cash equivalents:
Beginning of period 99,137
 27,547
Beginning of period80,619  99,137  
End of period $61,911
 $25,797
End of period$53,794  $61,911  
    
Supplemental cash flow information:    Supplemental cash flow information:
Cash paid for interest $1,365
 $970
Cash paid for interest$924  $1,365  
Cash paid for income taxes $1,532
 $2,707
Cash paid for income taxes$3,400  $1,532  
Operating lease right-of-use assets obtained in exchange for operating lease liabilitiesOperating lease right-of-use assets obtained in exchange for operating lease liabilities$1,140  $—  
Cash paid for operating lease liabilitiesCash paid for operating lease liabilities$1,672  $—  
Non-cash items:    Non-cash items:
Property, plant and equipment financed with accounts payable $369
 $2,347
Property, plant and equipment financed with accounts payable$794  $369  
Amounts payable to Seller in business combinationAmounts payable to Seller in business combination$2,642  $—  
    
See notes to unaudited consolidated financial statements.statements (unaudited).

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Note 1 - General
Business Description
Construction Partners, Inc. (the "Company"“Company”) is a leading infrastructure and road construction company operating in Alabama, Florida, Georgia, North Carolina and South Carolina through its wholly owned subsidiaries. The Company provides site development, paving, utility and drainage systems services, as well as construction materials including hot mix asphalt ("HMA"(“HMA”), aggregates, ready mixready-mix concrete, and liquid asphalt.asphalt cement supply. The Company executes projects for a mix of private, municipal, state, and federal customers that are both privately and publicly funded. The majority of the work is performed under fixed unit price contracts and, to a lesser extent, fixed total price contracts.

The Company was formed asis a Delaware corporation in 2007 as a holding company for its wholly owned subsidiary,and successor by merger to Construction Partners Holdings, Inc., a Delaware corporation ("CPHI")which incorporated in 1999 thatand began operations in 2001 to execute an acquisition growth strategy in the hot mix asphaltHMA paving and construction industry. SunTx Capital Partners ("SunTx"(“SunTx”), a private equity firm based in Dallas, Texas, is the Company'sCompany’s majority investor and has owned a controlling interest in the Company'sCompany’s stock since the Company'sCompany’s inception.

Seasonality
The use and consumption of our products and services fluctuate due to seasonality. Our products are used, and our construction operations and production facilities are located, outdoors. Therefore, seasonal changes and other weather-related conditions, in particular extended snowy, rainy or cold weather in the winter, spring or fall and major weather events, such as hurricanes, tornadoes, tropical storms and heavy snows, can adversely affect our business and operations through a decline in both the use of our products and demand for our services. In addition, construction materials production and shipment levels follow activity in the construction industry, which typically occurs in the spring, summer and fall. Warmer and drier weather during the third and fourth quarters of our fiscal year typically result in higher activity and revenues during those quarters. The first and second quarters of our fiscal year typically have lower levels of activity due to adverseless favorable weather conditions.

Note 2 - Significant Accounting Policies
Basis of Presentation
The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. Intercompany accounts and transactions have been eliminated in consolidation. These interim consolidated statements have been prepared pursuant to the rules and regulations of the United States Securities and Exchange Commission ("SEC"(“SEC”), which permit reduced disclosure for interim periods. The Consolidated Balance SheetSheets as of September 30, 20182019 was derived from audited financial statements for the fiscal year then ended, but does not include all necessary disclosures required by accounting principles generally accepted accounting principles in the United States of America ("GAAP"(“GAAP”) with respect to annual financial statements. In the opinion of management, the unaudited consolidated financial statements include all recurring adjustments and normal accruals necessary for a fair presentation of the Company'sCompany’s financial position, results of operations and cash flows for the dates and periods presented. These consolidated financial statements and accompanying notes should be read in conjunction with the Company'sCompany’s audited annual consolidated financial statements and notes thereto included in its Annual Report on Form 10-K for the fiscal year ended September 30, 20182019 (the "2018“2019 Form 10-K"10-K”). Results for interim periods are not necessarily indicative of the results to be expected for a full fiscal year or for any future period.
Common share and per share amounts have been retroactively adjusted for all periods presented to give effect to the Stock Split described in Note 8 - Equity.
Management'sManagement’s Estimates
The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the recorded amounts of assets, liabilities, stockholders'stockholders’ equity, revenues and expenses during the reporting period, and the disclosure of contingent liabilities at the date of the consolidated financial statements. Estimates are used in accounting for items such as recognition of revenues and cost of revenues, goodwill and other intangible assets, valuation of operating lease right-of-use assets, allowance for doubtful accounts, valuation allowances related to income taxes, accruals for potential liabilities related to lawsuits or insurance claims, the fair value of derivative instruments and the fair value of equity-based compensation awards. Estimates are continually evaluated based on historical information and actual experience; however, actual results could differ from these estimates.
A description of certain critical accounting policies of the Company is presented below. Additional critical accounting policies and the underlying judgments and uncertainties are described in the notes to the Company'sCompany’s annual consolidated financial statements included in its 2018the 2019 Form 10-K.

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Emerging Growth Company
The Company is an "emerging“emerging growth company"company,” as defined by the Jumpstart Our Business Startups Act (the "JOBS Act"“JOBS Act”), enacted in April 2012. As an emerging growth company, the Company could have taken advantage of an exemption that would have allowed the Company to wait to comply with new or revised financial accounting standards until the effective date of such standards for private companies. However, the JOBS Act provides that a company may elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies, but such election to opt out is irrevocable. The Company has irrevocably elected to opt out of such extended transition period, which means that when a standard is issuednew or revised and itstandard has a different effective datesdate for public and private companies, the Company is required to adopt the new or revised standard at the effective date applicable to public companies that are not emerging growth companies.

Cash and Cash Equivalents
Cash consists principally of currency on hand and demand deposits at commercial banks. Cash equivalents are short-term, highly liquid investments that are both readily convertible to known amounts of cash and are so near their maturity that they present insignificant risk of changes in value because of changes in interest rates. Cash equivalents include investments with original maturities of three months or less. The Company maintains demand accounts, money market accounts and certificates of deposit at several banks. From time to time, the account balances have exceeded the maximum available federal deposit insurance coverage limit. The Company has not experienced any losses in such accounts and regularly monitors its credit risk.
Contracts Receivable Including Retainage, net
Contracts receivable are generally based on amounts billed and currently due from customers, amounts currently due but unbilled, and amounts retained by the customer pending completion of a project. It is common in the Company'sCompany’s industry for a small portion of either progress billings or the contract price, typically 10%, to be withheld by the customer until the Company completes a project to the satisfaction of the customer in accordance with contract terms. Such amounts, defined as retainage, represent a contract asset and are included on the Consolidated Balance SheetSheets as "Contracts“Contracts receivable including retainage, net"net”. Based on the Company'sCompany’s experience with similar contracts in recent years, billings for such retainage balances are generally collected within one year of the completion of the project.

The carrying value of contracts receivable including retainage, net of the allowance for doubtful accounts, represents their estimated net realizable value. Management provides for uncollectible accounts through a charge to earnings and a credit to the allowance for doubtful accounts based on its assessment of the current status of individual accounts, type of service performed, and current economic conditions. Balances that are still outstanding after management has used reasonable collection efforts are written off through a charge to the allowance for doubtful accounts and an adjustment of the contract receivable.
Contract Assets and Contract Liabilities
Billing practices for the Company'sCompany’s contracts are governed by the contract terms of each project based on (i) progress toward completion approved by the owner, (ii) achievement of milestones or (iii) pre-agreed schedules. Billings do not necessarily correlate with revenues recognized under the cost-to-cost input method (formerly known as the percentage-of-completion method of accounting.method). The Company records contract assets and contract liabilities to account for these differences in timing.
The contract asset, "Costs“Costs and estimated earnings in excess of billings on uncompleted contracts,"” arises when the Company recognizes revenues for services performed under its construction projects, but the Company is not yet entitled to bill the customer under the terms of the contract. Amounts billed to customers are excluded from this asset and reflected on the Consolidated Balance SheetSheets as "Contracts“Contracts receivable including retainage, net"net”. Included in costs and estimated earnings in excess of billings on uncompleted contracts are amounts the Company seeks or will seek to collect from customers or others for (i) errors, (ii) changes in contract specifications or design, (iii) contract change orders in dispute, unapproved as to scope and price, or (iv) other customer-related causes of unanticipated additional contract costs (such as claims). Such amounts are recorded at estimated net realizable value when realization is probable andto the extent that the amount can be reasonably estimated.estimated and recovery is probable. Claims and unapproved change orders made by the Company may involve negotiation and, in rare cases, litigation. Unapproved change orders and claims also involve the use of estimates, and revenues associated with unapproved change orders and claims are included when realizationin the transaction price to the extent that it is probable and amounts can be reliably determined.that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty is resolved. The Company did not recognize any material amounts associated with claims and unapproved change orders during the periods presented.

The contract liability, "Billings“Billings in excess of costs and estimated earnings on uncompleted contracts,"” represents the Company'sCompany’s obligation to transfer to a customer goods or services to a customer for which the Company has been paid by the customer or for which the Company has billed the customer under the terms of the contract. Revenue for future services reflected in this account are recognized, and the liability is reduced, as the Company subsequently satisfies the performance obligation under the contract.

Costs and estimated earnings in excess of billings on uncompleted contracts and billings in excess of costs and estimated earnings on uncompleted contracts are typically resolved within one year and are not considered significant financing components.
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Concentration of Risks
Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of contracts receivable including retainage. In the normal course of business, the Company provides credit to its customers and does not generally require collateral. ConcentrationsThe Company monitors concentrations of credit risk associated with these receivables are monitored on an ongoing basis. The Company has not historically experienced significant credit losses, due primarily to management'smanagement’s assessment of customers'customers’ credit ratings. The Company principally deals with recurring customers, state and local governments and well-known local companies whose reputations are known to management. The Company performs credit checks for significant new customers and generally requires progress payments for significant projects. The Company generally has the ability to file liens against the property if payments are not made on a timely basis. No single customer accounted for more than 10%10.0% of the Company'sCompany’s contracts receivable including retainage, net balance at March 31, 20192020 or September 30, 2018.2019.
Projects performed for various Departments of Transportation accounted for 37.2%27.8% and 37.6%37.2% of consolidated revenues for the three months ended March 31, 20192020 and 2018 ,2019, respectively, and for 37.2%29.4% and 37.4%37.2% of consolidated revenues for the six months ended March 31, 2020 and 2019, and 2018, respectively. Customers thatTwo customers accounted for more than 10%10.0% of consolidated revenues during those periods are presented below:the three and six months ended March 31, 2019, as follows:
 % of Consolidated Revenues% of Consolidated Revenues
 For the Three Months Ended March 31, For the Six Months Ended March 31,For the Three Months Ended March 31,For the Six Months Ended March 31,
 2019 2018 2019 20182020201920202019
Alabama Department of Transportation 12.3% 13.2% 11.1% 13.2%Alabama Department of Transportation8.8 %  12.3 %9.8 %  11.1 %
North Carolina Department of Transportation 10.7% 11.8% 12.6% 12.6%North Carolina Department of Transportation7.6 %  10.7 %8.1 %  12.6 %
Revenues from Contracts with Customers
The Company derives all of its revenues from contracts with its customers, predominantly by performing construction services for both public and private infrastructure projects, with an emphasis on highways, roads, bridges, airports and commercial and residential developments. These projects are performed for a mix of federal, state, municipal and private customers. In addition, the Company generatesderives revenues from the sale of construction materials, including HMA, aggregates, liquid asphalt cement and ready-mix concrete to third-party public and private customers pursuant to contracts with those customers. The following table reflects, for the periods presented, (i) revenues generated from public infrastructure construction projects and the sale of construction materials to public customers and (ii) revenues generated from private infrastructure construction projects and the sale of construction materials to private customers.
% of Consolidated Revenues
 For the Three Months Ended March 31, For the Six Months Ended March 31,For the Three Months Ended March 31,For the Six Months Ended March 31,
 2019 2018 2019 20182020201920202019
Private $50,419
 $42,620
 $99,986
 $92,232
Private39.4 %  30.7 %  39.4 %  31.4 %  
Public $113,885
 $76,279
 $218,645
 $177,088
Public60.6 %  69.3 %  60.6 %  68.6 %  
Revenues derived from construction projects are recognized over time using the percentage-of-completion method of accounting, as the Company satisfies its performance obligations by transferring to the customer control of the asset created or enhanced by the project to the customer.project. Recognition of revenues and cost of revenues for construction projects requires significant judgment by management, including, among other things, estimating total costs expected to be incurred to complete a project and measuring progress toward completion. Management reviews contract estimates regularly to assess revisions of estimated costs to complete a project and measurement of progress toward completion.
Management believes the Company maintains reasonable estimates based on prior experience; however, many factors contribute to changes in estimates of contract costs. Accordingly, estimates made with respect to uncompleted projects are subject to change as each project progresses and better estimates of contract costs become available. All contract costs are recorded as incurred, and revisions to estimated total costs are reflected as soon as the obligation to perform is determined. Provisions are recognized for the full amount of estimated losses on uncompleted contracts whenever evidence indicates that the estimated total cost of a contract exceeds its estimated total revenue, regardless of the stage of completion. When the Company incurs additional costs related to work performed by subcontractors, the Company may be able to utilize contractual provisions to back charge the subcontractors for those costs. A reduction to costs related to back charges is recognized when the estimated recovery is probable and the amount can be reasonably estimated. Contract costs consist of (i) direct costs on contracts, including labor, materials, and amounts payable to subcontractors and (ii) indirect costs related to contract performance, such as insurance, employee benefits, and equipment (primarily depreciation, fuel, maintenance and repairs).

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Progress toward completion is estimated using the input method, measured by the relationship of total cost incurred through the measurement date to total estimated costs required to complete the project (cost-to-cost method). The Company believes this method best depicts the transfer of goods and services to the customer because it represents satisfaction of the Company'sCompany’s performance obligation under the contract, which occurs as the Company incurs costs. The Company measures percentage of completion based on the performance of a single performance obligation under its construction projects. Each of the Company'sCompany’s construction contracts represents a single performance obligation to complete a defined construction project. This is because goods and services promised for delivery to a customer are not distinct, as the customer cannot benefit from any individual portion of the services on its own. All deliverables under a contract are part of a project defined by a customer and represent a series of integrated goods and services that have the same pattern of delivery to the customer and use the same measure of progress toward satisfaction of the performance obligation as the customer'scustomer’s asset is created or enhanced by the Company. The Company'sCompany’s obligation is not satisfied until the entire project is complete.
Revenue recognized during a reporting period is based on the estimated incremental percentage-of-completioncost-to-cost input method applied to the total contracttransaction price, including adjustments for variable consideration, such as liquidated damages, penalties or bonuses, related to the timeliness or quality of project performance. Such adjustments are made to reflectThe Company includes variable consideration in the estimated transaction price at the most likely amount of consideration management expectsto which the Company expects to be entitled or the most likely amount the Company expects to atincur, in the completioncase of liquidated damages or penalties. Such amounts are included in the contract, based on the best information availabletransaction price to the Company. The basis for total contract price is a stated amount in the contract, which is generally either fixed unit price or fixed total price, as described below. The Company adjusts the estimated contract price to include variable consideration to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur or when the uncertainty associated with the variable consideration is resolved. Total contract price is adjusted to reflect expected liquidated damages assessments or other penalties in the period theThe Company determines they will be incurred or when the customer imposes the penalty. Total contract price is adjusted to reflect contract bonus provisions related to timeliness or quality metrics when realization is probable and amounts can be reliably determined, which is generally when they are awarded by the customer. We accountaccounts for changes in the measure of progress and changes to the estimated transaction price using a cumulative catch-up adjustment.
The majority of the Company'sCompany’s public construction contracts are fixed unit price contracts. Under fixed unit price contracts, the Company is committed to providing materials or services required by a contract at fixed unit prices (for example, dollars per ton of asphalt placed). The Company'sCompany’s private customer contracts are primarily fixed total price contracts, also known as lump sum contracts, which require that the total amount of work be performed for a single price. Contract cost is recorded as incurred, and revisions in contract revenue and cost estimates are reflected in the accounting period when known. Changes in job performance, job conditions and estimated profitability, including those changes arising from contract change orders, penalty provisions and final contract settlements, may result in revisions to estimated revenues and costscost and are recognized in the period in which the revisions are determined.
Change orders are modifications of an original contract that effectively change the existing provisions of the contract and become part of the single performance obligation that is partially satisfied at the date of the contract modification. This is because goods and services promised under change orders are generally not distinct from the remaining goods and services under the existing contract due to the significant integration of services performed in the context of the contract. Accordingly, change orders are generally accounted for as a modification of the existing contract and a single performance obligation. We account for the modification using a cumulative catch-up adjustment. Either the Company or its customers may initiate change orders, which may include changes in specifications or designs, manner of performance, facilities, equipment, materials, sites and period of completion of the work.
Revenues derived from the sale of HMA, aggregates, ready-mix concrete, and aggregatesliquid asphalt are recognized at athe point in time at which is when control of the product is transferred to the customer. Generally, that point in time is when the customer accepts delivery at its facility or receives product in its own transport vehicles from one of the Company'sCompany’s HMA plants. Upon purchase, the Company generally provides an invoice or similar document detailing the goods transferred to the customer. The Company generally offers payment terms customary in the industry, which typically require payment ranging from point-of-sale to 30 days following purchase.
Income Taxes
The provision for income taxes includes federal and state income taxes. Income taxes are accounted for under the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial statement carrying values and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the fiscal years in which the temporary differences are expected to be reversed or settled. The effect of a change in tax rates on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includesin which the enactment date.change is enacted. Management evaluates the realization of deferred tax assets and establishes a valuation allowance when it is more likely than not that all or a portion of the deferred tax assets will not be realized. Deferred tax assets and deferred tax liabilities are presented on a net basis by taxing authority and classified as non-current on the Consolidated Balance Sheet.Sheets. The Company classifies income tax-related interest and penalties as interest expense and other expenses, respectively.

Earnings per Share
As described in Note 8 – Equity, the Company completed an initial public offering (the "IPO") and reclassification (the "Reclassification") of its common stock during the fiscal year ended September 30, 2018, involving, among other things, a 25.2 to 1 split of shares of common stock (the "Stock Split") and the creation of a dual-class common stock structure. Prior to the Reclassification, allBasic net income of the Company wasper share attributable to the holders of shares of common stock immediately prior to the Reclassification. During the period beginning from the Reclassification through the IPO, all net income of the Company was attributable to holders of Class B common stock. Since the IPO, all net income of the Company has been attributable equally, on a per share basis, to the holders of Class A common stock and Class B common stock.
Basic earnings per sharestockholders is computed by dividing net income attributable to common stockholders by the weighted average number of aggregatecommon shares of pre-Reclassificationoutstanding during the period. Diluted net income per common stock, Class A common stock and Class B common stock, as applicable for the respective periods, calculated on a post-Stock Split basis. Diluted earnings per share is calculated by dividing net income attributable to common stockholders byis the weighted average number of aggregate shares of pre-Reclassificationsame as basic net income per share attributable to common stockholders, but includes dilutive unvested stock Class A common stock, Class B common stock and potential dilutive common shares determinedawards using the treasury method, calculated onstock method.
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Derivative Instruments
The Company evaluates its contracts to determine whether the contracts are derivative instruments. Certain contracts that meet the definition of a post-Stock Split basisderivative may be exempted from derivative accounting and treated as applicablenormal purchases or normal sales if documented as such. Normal purchases and normal sales are contracts that provide for the respective periods. Securitiespurchase or sale of something other than a financial instrument or derivative instrument that will be delivered in quantities expected to be used or sold over a reasonable period in the normal course of business.
The Company’s derivative instruments consist of commodity and interest rate swap contracts. None of the Company’s derivative instruments are designated as hedges for accounting purposes under the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 815, Derivatives and Hedging. Accordingly, the Company records derivative instruments on the Consolidated Balance Sheets as either an asset or liability measured at fair value and records changes in the fair value of derivatives in current earnings in the Consolidated Statements of Income for the period in which the change occurs. Gains and losses on derivatives are included in cash flows from operating activities.
Fair Value Measurements
The Company measures and discloses certain financial assets and liabilities at fair value. ASC Topic 820, Fair Value Measurements and Disclosures, defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Inputs used to measure fair value are classified using the following hierarchy:
Level 1. Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.
Level 2. Inputs other than quoted prices included within Level 1 that are anti-dilutiveobservable for the asset or liability, either directly or indirectly through corroboration with observable market data.
Level 3. Inputs are not includedunobservable for the asset or liability and include situations in which there is little, if any, market activity for the asset or liability. The inputs used in the calculationdetermination of diluted earnings per share.fair value are based on the best information available under the circumstances and may require significant management judgment or estimation.
The Company endeavors to utilize the best available information in measuring fair value.
The Company’s financial instruments include cash and cash equivalents, contracts receivable including retainage and accounts payable reflected as current assets and current liabilities on its Consolidated Balance Sheets at March 31, 2020 and September 30, 2019. Due to the short-term nature of these instruments, management considers their carrying value to approximate their fair value.
The Company also has term loans and a revolving credit facility, as described in Note 8 - Debt. The carrying value of amounts outstanding under these credit facilities is reflected as long-term debt, net of current maturities and current maturities of debt on the Company’s Consolidated Balance Sheets at March 31, 2020 and September 30, 2019. Due to the variable rate or short-term nature of these instruments, management considers their carrying value to approximate their fair value.
The Company also has derivative instruments. The fair value of derivative instruments is based on forward and spot prices, as described in Note 17 - Fair Value Measurements.
Management applies fair value measurement guidance to its impairment analysis for tangible and intangible assets.
Reclassifications
Certain amounts in prior periods have been reclassified to conform to the current period presentation. These reclassifications had no effect on previously reported net income.

Note 3 - Accounting Standards
Recently Adopted Accounting Pronouncements
Effective October 1, 2018,ASC Topic 842

ASC Topic 842, Leases (“Topic 842”) requires lessees to recognize operating lease right-of-use assets and operating lease liabilities on the Company adopted the requirements of ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) ("ASC 606") and related amendments. The Company used the modified retrospective approach. Thebalance sheet as described below. Prior to adoption of ASC 606Topic 842, operating leases were expensed on October 1, 2018 did not result in a material impact that required recognition of a cumulative adjustment ofstraight-line basis over the opening retained earnings balance for contracts that still required performance at September 30, 2018. Application of ASC 606 for the six months ended March 31, 2019 had the following impactlease term on the Company's Consolidated Balance Sheet at March 31, 2019 andCompany’s Consolidated Statements of Income, forand the threeCompany did not recognize operating lease right-of-use assets and six months ended March 31, 2019 (in thousands):operating lease liabilities on its Consolidated Balance Sheets.
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  As Reported Impact of ASC 606 Without Application of ASC 606
March 31, 2019      
Costs and estimated earnings in excess of billings on uncompleted contracts $12,595
 $(1,121) $11,474
Inventories $33,042
 $1,516
 $34,558
Accrued expenses and other liabilities $15,559
 $(38) $15,521
Billings in excess of costs and estimated earnings on uncompleted contracts $34,657
 $543
 $35,200
       
For the Three Months Ended March 31, 2019      
Revenues $164,304
 $101
 $164,405
Cost of revenues $144,503
 $88
 $144,591
Provision (benefit) for income taxes $1,488
 $3
 $1,491
Net income $4,212
 $10
 $4,222
  
 
 
For the Six Months Ended March 31, 2019 
 
 
Revenues $318,631
 $(1,664) $316,967
Cost of revenues $277,702
 $(1,516) $276,186
Provision (benefit) for income taxes $3,139
 $(38) $3,101
Net income $9,366
 $(110) $9,256
The Company adopted Topic 842 effective October 1, 2019 using a modified retrospective transition approach with no prior-period retrospective adjustments. As a result, on the adoption date, the Company recognized (i) a net cumulative decrease to retained earnings of $0.2 million, (ii) additional operating lease right-of-use assets of $9.1 million, (iii) current operating lease liabilities of $2.9 million and (iv) non-current operating lease liabilities of $6.4 million. The Company elected to apply optional practical expedients that allowed the Company to forego reassessments of (i) the classification of leases existing at the date of adoption, (ii) the initial direct costs of any existing leases and (iii) whether any expired or existing contracts were, or contained, leases.
In connection with the adoption of Topic 842, the Company implemented several accounting policies relating to the identification and measurement of operating lease right-of-use assets and liabilities. At the inception of a contractual arrangement, the Company determines whether a contract contains a lease by assessing whether the contract conveys to the Company the right to control the use of an identified asset in exchange for consideration over a period of time. If so, the Company measures and records an operating lease liability equal to the present value of the future lease payments. Because most of the Company’s leases do not provide an implicit rate, the Company’s incremental borrowing rate is used in determining the present value of lease payments. The amount of the operating lease right-of-use asset consists of: (i) the amount of the initial measurement of the operating lease liability; (ii) any lease payments made at or before the commencement date, minus any lease incentives received; and (iii) any initial direct costs incurred. The present value calculation may account for an option to extend or terminate the lease when it is reasonably certain that the Company will exercise the option.
The Company has refined its accounting policies and related internal controls affected by this update. Management's assessment of the Company's construction contracts under the new standard supportselected not to apply the recognition requirements to short-term leases (those with terms of revenue over time using12 months or less) or leases to explore for or use minerals. Instead, for these types of leases, the percentage-of-completion method of accounting, measured by the relationship of total cost incurred to total estimated contract costs (cost-to-cost method), which is consistent with the Company's historical revenue recognition practices. As such, the Company's construction contracts continue to be recognized over time considering the continuous transfer of control to its customers during the performance of

construction projects. The Company also enhanced its disclosures regarding judgments and estimates used by managementrecognizes lease expense in the applicationConsolidated Statements of ASC 606 in Note 2 - SignificantIncome on a straight-line basis over the lease term.

Recently Issued Accounting Policies.Pronouncements Not Yet Adopted

In January 2017,June 2016, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805): ClarifyingAccounting Standards Update (“ASU”) 2016-13, Financial Instruments - Credit Losses (“Topic 326”), which introduces an impairment model that is based on expected losses rather than incurred losses. Under the Definitionnew guidance, an entity recognizes as an allowance its estimate of a Business ("ASC 805").expected credit losses, which the FASB believes will result in more timely recognition of such losses. The amendments of this update refine the definition of a business. Priorpursuant to this update, guidance in ASC 805 defined a business as having an integrated set of assets along with three elements or activities: inputs, processes, and outputs (collectively referred to as a "set"). The amendments of this update provided a framework to assist in the evaluation of when a set is not a business. If substantially all of the fair value of gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets, the set is not a business. If that threshold is not met, the Company must perform further analysis to determine whether the set is a business. At a minimum, the set must include an input and a substantive process that together significantly contribute to the ability to create outputs.Topic 326 are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company adoptedexpects to adopt this update forguidance as required and is evaluating the Company’s fiscal year beginning October 1, 2018 and applied thepotential impact of adopting this guidance to acquisitions during the second quarter of the fiscal year ending September 30, 2019 as described in Note 4 - Business Acquisitions and Note 7 - Property, Plant and Equipment.on its consolidated financial statements.

Note 4 - Business Acquisitions
Florida Acquisition - October 2019
On February 26,October 1, 2019, a subsidiary of the Company executed an asset purchase agreement to acquireacquired substantially all of the assets of a hot mix asphaltan HMA manufacturing plant and ready-mix concrete businesspaving company located in Okeechobee,Palm City, Florida. This transaction enables the Company to serve new markets in south central Florida through an expanded geographic presence in the state. The acquisition washas been accounted for as a business combination in accordance with ASC 805.Topic 805, Business Combinations (“Topic 805”). The $17.7 million purchase price of $8.9 million was paid from cash on hand at closing on February 28, 2019.closing.
The provisional allocation of the purchase price to assets acquired and liabilities assumed, based on their estimated fair values at the acquisition date, was determined in accordance with the methodology described underFair Value Measurementsin Note 32 - Significant Accounting Policies to the Company'sCompany’s audited financial statements for the fiscal year ended September 30, 2018.2019. The provisional amounts allocated were not material to the Company's Consolidated Balance Sheet. The purchase price exceeding the net fair valueare $9.6 million of identifiableproperty, plant and equipment, $0.4 million of other current assets acquired and liabilities assumed was recorded as goodwill in the amount$7.7 million of $4.0 million,goodwill. Goodwill, which is deductible for income tax purposes. Goodwillpurposes, primarily represents the assembled work force and synergies expected to result from the acquisition. Upon finalizing the accounting for this transaction, management expects to ascribe value to other identifiable intangible assets, including customer relationships and customer backlog, which willwould reduce the preliminary amount allocated to goodwill.
The results of operations since the February 28,October 1, 2019 acquisition date attributable to this acquisition are included in the consolidated financial statements since the acquisition date and were not material to the Consolidated Statements of Income for the three orand six months ended March 31, 2019.2020. Pro forma results of operations as if the acquisition had been consummated on October 1, 20172018 would not be material to the Consolidated Statements of Income.
The Company recorded certain costs to effect the acquisition as they were incurred, which are reflected asin general and administrative expenses on the Company'sCompany’s Consolidated Statements of Income in the amount of $0.1 million for the six months ended March 31, 2020.

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Florida Acquisition - March 2020
On March 23, 2020, a subsidiary of the Company acquired 2 HMA manufacturing plants and certain related assets located in Pensacola and Defuniak Springs, Florida. These acquired plants enable the Company to serve new markets in the western Florida panhandle. The acquisition has been accounted for as a business combination in accordance with Topic 805. The $9.8 million purchase price was paid in cash at closing, with an additional $2.6 million accrued at March 31, 2020 for plant inventory acquired as of March 23, 2020.
The provisional allocation of the purchase price to assets acquired and liabilities assumed, based on their estimated fair values at the acquisition date, was determined in accordance with the methodology described under Fair Value Measurements in Note 2 - Significant Accounting Policies to the Company’s audited financial statements for the fiscal year ended September 30, 2019. The provisional amounts allocated are $9.7 million of property, plant and equipment, $2.6 million of other current assets and $0.1 million of goodwill. Goodwill, which is deductible for income tax purposes, primarily represents the assembled work force synergies expected to result from the acquisition. Upon finalizing the accounting for this transaction, management expects to ascribe value to other identifiable intangible assets, including customer relationships and customer backlog, which may reduce the preliminary amount allocated to goodwill.
The results of operations since the March 23, 2020 acquisition date attributable to this acquisition are included in the consolidated financial statements since the acquisition date and were not material to the Consolidated Statements of Income for the three and six months ended March 31, 2020. Pro forma results of operations as if the acquisition had been consummated October 1, 2018 would not be material to the Consolidated Statements of Income.
The Company recorded certain costs to effect the acquisition as they were incurred, which are reflected in general and administrative expenses on the Company’s Consolidated Statements of Income in the amount of $0.1 million for the three and six months ended March 31, 2019.2020.
The Scruggs Company
On May 15, 2018, the Company executed a stock purchase agreement (the "Stock Purchase Agreement") to complete the acquisition of 100% of the common shares and voting interests of The Scruggs Company ("Scruggs"), which complemented the Company's vertically integrated southeastern United States operations, providing new bidding areas in the expanding Georgia market (the "Scruggs Acquisition"). This acquisition was accounted for as a business combination in accordance with ASC 805.
The Consolidated Statements of Income include $18.4 million of revenue and $1.4 million of net income attributable to operations of Scruggs for the three months ended March 31, 2019, and $34.7 million of revenue and $2.9 million of net income attributable to the operations of Scruggs for the six months ended March 31, 2019. The following presents unaudited pro forma revenues and net income for the three and six months ended March 31, 2018 as though the Scruggs Acquisition had occurred on October 1, 2016 (in thousands):
  For the Three Months Ended March 31, 2018 For the Six Months Ended March 31, 2018
   
Pro forma revenues $139,212
 $312,572
Pro forma net income $14,377
 $25,035
     

Unaudited pro forma financial information is presented as if the operations of Scruggs had been included in the consolidated results of the Company since October 1, 2016, and gives effect to transactions that are directly attributable to the Scruggs Acquisition, including adjustments to:
(a)Include the pro forma results of operations of Scruggs for the three and six months ended March 31, 2018.
(b)Include additional depreciation and depletion expense related to the fair value of acquired property, plant and equipment and quarry reserves, as applicable, as if such assets were acquired on October 1, 2016 and the Company's depreciation and depletion methodologies were consistently applied to such assets.
(c)Include interest expense under the Compass Term Loan, defined in Note 9 - Debt, as if the $22.0 million borrowed to partially finance the purchase price was borrowed on October 1, 2016. Interest expense calculations further assume that no principal payments were made applicable to the $22.0 million borrowed during the period from October 1, 2016 through March 31, 2018, and that the interest rate in effect on the date the Company made the additional $22.0 million borrowing on May 15, 2018 was in effect for the period from October 1, 2016 through March 31, 2018.
Unaudited pro forma information is presented for informational purposes only and may not be indicative of revenue or net income that would have been achieved if the Scruggs Acquisition had occurred on October 1, 2016.
Note 5 - Contracts Receivable Including Retainage, net
Contracts receivable including retainage, net consisted of the following at March 31, 20192020 and September 30, 20182019 (in thousands):
March 31, 2019 September 30, 2018March 31, 2020September 30, 2019
(unaudited)  (unaudited)
Contracts receivable$89,197
 $104,541
Contracts receivable$104,686  $121,050  
Retainage17,691
 16,848
Retainage19,387  19,835  
106,888
 121,389
124,073  140,885  
Allowance for doubtful accounts(1,347) (1,098)Allowance for doubtful accounts(1,176) (1,003) 
Contracts receivable including retainage, net$105,541
 $120,291
Contracts receivable including retainage, net$122,897  $139,882  
   
Retainage receivables have been billed, but are not due until contract completion and acceptance by the customer.


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Note 6 - CostsContract Assets and Estimated Earnings on Uncompleted ContractsLiabilities
Costs and estimated earnings compared to billings on uncompleted contracts at March 31, 20192020 and September 30, 20182019 consisted of the following (in thousands):
March 31, 2020September 30, 2019
(unaudited)
Costs on uncompleted contracts$905,840  $900,880  
Estimated earnings to date on uncompleted contracts114,593  123,256  
1,020,433  1,024,136  
Billings to date on uncompleted contracts(1,033,872) (1,043,221) 
Net billings in excess of costs and estimated earnings on uncompleted contracts$(13,439) $(19,085) 

March 31, 2019 September 30, 2018

(unaudited)  
Costs on uncompleted contracts$810,269
 $743,322
Estimated earnings to date on uncompleted contracts105,893
 95,155

916,162
 838,477
Billings to date on uncompleted contracts(938,224) (867,881)
Net billings in excess of costs and estimated earnings on uncompleted contracts$(22,062) $(29,404)


 
Significant changes to balances of costs and estimated earnings in excess of billings (contract asset) and billings in excess of costs and estimated earnings (contract liability) on uncompleted contracts from September 30, 20182019 to March 31, 20192020 are presented below (in thousands):
 
Costs and Estimated Earnings in Excess of Billings on
 Uncompleted Contracts
 
Billings in Excess of Costs and Estimated Earnings on
 Uncompleted Contracts
 Net Billings in Excess of Costs and Estimated Earnings on Uncompleted Contracts
September 30, 2018$9,334
 $(38,738) $(29,404)
Changes in revenue billed, contract price or cost estimates3,261
 4,081
 7,342
March 31, 2019 (unaudited)$12,595
 $(34,657) $(22,062)
Costs and Estimated Earnings in Excess of Billings on
Uncompleted Contracts		Billings in Excess of Costs and Estimated Earnings on
Uncompleted Contracts		Net Billings in Excess of Costs and Estimated Earnings on Uncompleted Contracts
September 30, 2019$12,030  $(31,115) $(19,085) 
Changes in revenue billed, contract price or cost estimates4,071  1,575  5,646  
March 31, 2020 (unaudited)$16,101  $(29,540) $(13,439) 
At March 31, 2019,2020, the Company had unsatisfied or partially unsatisfied performance obligations under construction project contracts representing approximately $525$515.4 million in aggregate transaction price. The Company expects to earn revenue as it satisfies its performance obligations under those contracts in the amount of approximately $338$322.7 million during the remainder of the fiscal year ending September 30, 20192020 and approximately $187$192.7 million thereafter.

Note 7 - Property, Plant and Equipment
Property, plant and equipment at March 31, 20192020 and September 30, 20182019 consisted of the following (in thousands):
  March 31, 2019 September 30, 2018
  (unaudited)  
Construction equipment $207,931
 $190,420
Asphalt plants 81,705
 79,563
Land and improvements 34,815
 29,624
Quarry reserves 20,822
 20,908
Buildings 13,320
 12,416
Furniture and fixtures 4,661
 4,422
Leasehold improvements 1,244
 765
Total property, plant and equipment, gross 364,498
 338,118
Accumulated depreciation, depletion and amortization (168,550) (160,795)
Construction in progress 1,921
 1,369
Total property, plant and equipment, net $197,869
 $178,692
    
On February 28, 2019, the Company acquired a liquid asphalt terminal located in Panama City, Florida. The purchase price of $10.8 million was paid in cash on the date of acquisition. The Company uses the terminal to receive, store and process liquid asphalt primarily for use in its construction projects. The transaction was accounted for as an asset acquisition in accordance with ASC 805.

Accordingly, the purchase price and direct costs of $0.1 million incurred to complete the transaction were allocated to asset categories based on their relative fair value at the date of acquisition.
March 31, 2020September 30, 2019
(unaudited)
Construction equipment$247,396  $214,500  
Plants98,460  92,279  
Land and improvements40,092  34,365  
Quarry reserves20,492  20,678  
Buildings17,954  15,458  
Furniture and fixtures5,246  4,864  
Leasehold improvements1,135  1,135  
      Total property, plant and equipment, gross430,775  383,279  
Accumulated depreciation, depletion and amortization(194,221) (177,927) 
Construction in progress3,529  518  
      Total property, plant and equipment, net$240,083  $205,870  
Depreciation depletion and amortizationdepletion expense related to property, plant and equipment was $7.3$9.5 million and $5.6$7.3 million for the three months ended March 31, 20192020 and March 31, 2018,2019, respectively, and $14.2$18.9 million and $11.2$14.2 million for the six months ended March 31, 20192020 and March 31, 2018,2019, respectively.

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Note 8 - Equity
At March 31, 2019 and September 30, 2018, the Company had authorized for issuance 10,000,000 shares of preferred stock, par value $0.001. No shares of preferred stock were issued and outstanding at March 31, 2019 or September 30, 2018.
Reclassification of Common Stock and Initial Public Offering
On April 23, 2018, the Company completed the Reclassification by amending and restating its certificate of incorporation to effectuate a dual class common stock structure consisting of Class A common stock and Class B common stock. As a result, each share of common stock, par value $0.001, was reclassified into 25.2 shares of Class B common stock so that all holders of shares of outstanding common stock became the holders of 41,817,537 shares of Class B common stock, and shares held by the Company in treasury became 3,170,034 Class B treasury shares. All share and per share amounts have been retroactively adjusted for all periods presented to give effect to the Stock Split.
On May 8, 2018, the Company completed its IPO, in which it sold 11,250,000 shares of Class A common stock at a price of $12.00 per share. Of these shares, 9,000,000 were shares of Class A common stock sold by the Company and 2,250,000 were sold by holders of Class B common stock, which shares upon sale automatically converted into 2,250,000 shares of Class A common stock. On May 24, 2018, the underwriters of the IPO partially exercised their over-allotment option to purchase an additional 700,000 shares of Class A common stock at the IPO price of $12.00, less the underwriting discount and commissions. Of these shares, 350,000 were shares of Class A common stock sold by the Company and 350,000 were sold by holders of Class B common stock, which shares upon sale automatically converted into 350,000 shares of Class A common stock.
At March 31, 2019 and September 30, 2018, the Company had authorized for issuance 400,000,000 shares of Class A common stock, par value $0.001, of which 11,950,000 were issued and outstanding.
At March 31, 2019 and September 30, 2018, the Company had authorized for issuance 100,000,000 shares of Class B common stock, par value $0.001, of which 42,387,571 were issued and 39,464,619 were outstanding, respectively. At March 31, 2019 and September 30, 2018, the Company held 2,922,952 shares in treasury, at an average cost of $5.34 per share.
Subsequent to March 31, 2019, certain stockholders of the Company converted a total of 19,856,313 shares of the Company's Class B common stock, par value $0.001, on a one-for-one basis, into shares of the Company's Class A common stock, par value $0.001. Following the conversion, there were 31,806,313 Class A shares and 19,608,306 Class B shares outstanding.


Note 9 - Debt
The Company maintains various credit facilities from time to time to finance acquisitions, the purchase of real estate, construction equipment, asphalt plants and other fixed assets, and for general working capital purposes. This includes,These include, among other things, a credit agreement with Compass BankBBVA USA (“BBVA”), as agent, sole lead arrangerissuing bank and sole bookrunnera lender, and certain other lenders (as amended, the "Compass“BBVA Credit Agreement"Agreement”) providing, which provides for a $72.0 million term loan with an original principal amount of $82.0 million (the "Compass Term Loan"“Term Loan”) and a $30.0 million revolving credit facility (the "Compass Revolving“Revolving Credit Facility"Facility”). Debt at March 31, 20192020 and September 30, 20182019 consisted of the following (in thousands):
March 31, 2020September 30, 2019
(unaudited)
Long-term debt:
BBVA Term Loan$50,600  $44,700  
BBVA Revolving Credit Facility15,000  5,000  
Other long-term debt368  563  
Total long-term debt65,968  50,263  
Deferred debt issuance costs(413) (263) 
Debt discount(2) (4) 
Current maturities of long-term debt(8,457) (7,538) 
Long-term debt, net of current maturities$57,096  $42,458  
On October 1, 2019, the Company and each of its wholly owned subsidiaries entered into an amendment to the BBVA Credit Agreement that, among other things: (i) added Bank of America, N.A. (“Bank of America”) as a party in connection with the assignment by BBVA to Bank of America of certain of its lending obligations under the BBVA Credit Agreement; (ii) increased the aggregate amount of the Term Loan commitment by the lenders by $10.0 million to $54.7 million; (iii) provided for a Term Loan advance to the Company in the aggregate amount of $10.0 million, with the proceeds to be used solely for the purpose of buying out certain operating lease obligations; and (iv) extended the maturity date for the outstanding Term Loan advances from July 1, 2022 to October 1, 2024. In order to hedge against the risk of changes in interest rates on this advance, on October 1, 2019, the Company entered into an interest rate swap agreement with a notional amount of $5.9 million, under which the Company pays a fixed percentage rate of 1.58% and receives a credit based on the applicable London Interbank Offered Rate (“LIBOR”).
On February 27, 2020 the Company entered into an additional interest rate swap agreement with a notional amount of $26.3 million, under which the Company pays a fixed percentage rate of 1.24% and receives a credit based on the applicable LIBOR rate.
In March 2020, the Company drew $15.0 million on the Revolving Credit Facility to fund the March 23, 2020 Florida acquisition and to provide additional liquidity (see Note 4 - Business Acquisitions).

Note 9 - Equity
Shares of our Class A common stock and Class B common stock are identical in all respects, except with respect to voting rights, conversion rights and transfer restrictions applicable to shares of Class B common stock. The holders of Class A common stock are entitled to one vote per share, and the holders of Class B common stock are entitled to ten votes per share. The holders of Class A common stock and Class B common stock vote together as a single class on all matters submitted to a vote of stockholders, including the election of directors, unless otherwise required by applicable law or the Company’s certificate of incorporation or bylaws. Shares of Class B common stock are convertible into shares of Class A common stock at any time at the option of the holder or upon any transfer, subject to certain limited exceptions. In addition, upon the election of the holders of a majority of the then-outstanding shares of Class B common stock, all outstanding shares of Class B common stock will be converted into shares of Class A common stock. Once converted into shares of Class A common stock, shares of Class B common stock will not be reissued. Class A common stock is not convertible into any other class of the Company’s capital stock.
Conversion of Class B Common Stock to Class A Common Stock
During the six months ended March 31, 2020, certain stockholders of the Company converted a total of 107,682 shares of Class B common stock into shares of Class A common stock on a 1-for-one basis. Following the conversions, there were 32,705,418 shares of Class A common stock and 19,076,327 shares of Class B common stock outstanding.

14

March 31, September 30,
 2019 2018

(unaudited)  
Long-term debt:
 
Compass Term Loan$50,100
 $57,300
Compass Revolving Credit Facility5,000
 5,000
Other long-term debt758
 964
Total long-term debt55,858
 63,264
Deferred debt issuance costs(312) (362)
Debt discount(9) (14)
Current maturities of long-term debt(14,836) (14,773)
Long-term debt, net of current maturities$40,701
 $48,115





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Note 10 - Earnings Per Share
As describeddiscussed in Note 89 -Equity, the Company completed an IPO and Reclassificationhas two classes of common stock. The Company has not presented earnings per share under the two-class method, because the earnings per share are the same for both Class A common stock during the third quarter of the fiscal year ended September 30, 2018.
and Class B common stock. The following table summarizes the weighted-average number of basic common shares outstanding and the calculation of basic earnings per share for the periods presented (in thousands, except share and per share amounts):
For the Three Months Ended March 31,For the Six Months Ended March 31,
2020201920202019
Numerator
Net income attributable to common shareholders$1,537  $4,212  $6,998  $9,366  
Denominator
Weighted average number of common shares outstanding, basic51,489,211  51,414,619  51,489,211  51,414,619  
Net income per common share attributable to common shareholders, basic$0.03  $0.08  $0.14  $0.18  
The following table summarizes the calculation of the weighted-average number of diluted common shares outstanding and the calculation of basic and diluted earnings per share for the periods presented (in thousands, except share and per share amounts):
For the Three Months Ended March 31,For the Six Months Ended March 31,
2020201920202019
Numerator
Net income attributable to common stockholders$1,537  $4,212  $6,998  $9,366  
Denominator
Weighted average number of basic common shares outstanding, basic51,489,211  51,414,619  51,489,211  51,414,619  
Effect of dilutive securities:
Restricted stock grants under 2018 Equity Incentive Plan130,192  —  123,129  —  
Weighted average number of diluted common shares outstanding51,619,403  51,414,619  51,612,340  51,414,619  
Net income per diluted common share attributable to common stockholders$0.03  $0.08  $0.14  $0.18  

Basic        
  For the Three Months Ended March 31, For the Six Months Ended March 31,
  2019 2018 2019 2018
Numerator        
Net income attributable to common shareholders $4,212
 $11,248
 $9,366
 $22,244
Denominator        
Weighted average number of common shares outstanding, basic 51,414,619
 41,717,024
 51,414,619
 41,704,071
Net income per common share attributable to common shareholders, basic $0.08
 $0.27
 $0.18
 $0.53
         
         
Diluted        
  For the Three Months Ended March 31, For the Six Months Ended March 31,
  2019 2018 2019 2018
Numerator        
Net income attributable to common stockholders $4,212
 $11,248
 $9,366
 $22,244
Denominator        
Weighted average number of common
shares outstanding, basic		 51,414,619
 41,717,024
 51,414,619
 41,704,071
Effect of dilutive securities:        
2010 Non-Plan Stock Options Agreement options —
 193,098
 —
 170,371
Weighted average number of common
shares outstanding, diluted		 51,414,619
 41,910,122
 51,414,619
 41,874,442
Net income per common share attributable
to common stockholders, diluted		 $0.08
 $0.27
 $0.18
 $0.53
         
The Company excluded 63,000 common stock equivalents from the calculation of diluted earnings per share for the three and six months ended March 31, 2018 because their inclusion would be anti-dilutive. There were no anti-dilutive securities excluded from the calculation of diluted earnings per share for the three or six months ended March 31, 2019.
Note 11 - Provision for Income Taxes
The Company files a consolidated United States federal income tax return and income tax returns in various states. Management evaluated the Company'sCompany’s tax positions at March 31, 2019, based on appropriate provisions of applicable enacted tax laws and regulations and believes that they are supportable based on their specific technical merits and the facts and circumstances of the respective transactions.
On December 22, 2017, the United States government enacted comprehensive tax legislation known as the Tax Cuts and Jobs Act (the "Tax Act"). The Tax Act included broad and complex changes to the United States tax code, including a reduction in the United States federal corporateCompany’s effective income tax rate from 35.0% to 21.0% effective January 1, 2018. For periods during the fiscal year ended September 30, 2018, the Company recorded its income tax provision based on a blended U.S. statutory rate of 24.5%, which is based on a proration of the applicable tax rates before and after the effective date of the Tax Act, and the applicable state income taxes.
During the six months ended March 31, 2018, the Company recorded a provisional discrete tax benefit of $3.5 million related to the Tax Act, primarily related to an adjustment of its United States deferred tax liabilities by the same amount, reflecting the reduction in the United States federal corporate income tax rate. This net reduction in deferred tax liabilities also included the estimated impact on

the Company's net state deferred tax assets. The Company completed its accounting for the income tax effects of the Tax Act during the fourth quarter of its fiscal year ended September 30, 2018.
The Company's effective tax rate for the three months ended March 31, 2020 and 2019 was 25.7% and March 31, 2018 was 26.1% and 29.8%, respectively. The lower effective tax rate for the three months ended March 31, 2019 compared to the three months ended March 31, 2018 was primarily due to the lower United States statutory income tax rate during the three months ended March 31, 2019 as described above. The Company'sCompany’s effective tax rate for the six months ended March 31, 2020 and 2019 was 20.9% and March 31, 2018 was 25.1% and 15.2%, respectively. The lower effective income tax rate for the six months ended March 31, 2018 compared to2020 was favorably impacted by the six months ended March 31, 2019 was primarily due to thefiling of an amended consolidated state return. The Company recorded an amended return benefit of $0.4 million resulting from the tax credit recorded during the six months ended March 31, 2018utilization of net operating loss carryforwards and related to the enactmentrelease of the Tax Act.valuation allowance.
Note 12 - Related Parties
On December 31, 2017, the Company sold an indirect wholly owned subsidiary (the “Disposed Entity”) to an immediate family member of a Senior Vice President of the Company ("(“Purchaser of subsidiary"Subsidiary”) in consideration for an interest-bearinga promissory note receivable in the amount of $1.0 million, which approximated the net book value of the disposed entity.Disposed Entity. At March 31, 2019,2020, $0.1 million and $0.7$0.6 million was reflected on the Company'sCompany’s Consolidated Balance SheetSheets within other current assets and other assets, respectively, representing the remaining balances on this note receivable.the promissory note. In connection with this transaction, the Company also received an interest-bearinga promissory note receivable from the disposed entity ("Disposed entity")Entity on December 31, 2017 in the amount of $1.0 million, representing certain accounts payable of the Disposed entityEntity that were paid by the Company. At March 31, 2019,2020, $0.1 million and $0.8$0.4 million was reflected on the Company'sCompany’s Consolidated Balance Sheet
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Sheets within other current assets and other assets, respectively, representing the remaining balancebalances on this note receivable.the promissory note. Remaining principal and interest payments are scheduled to be made in periodic installments during fiscal year 20192020 through fiscal year 2026.

From time to time, the Company conducts or has conducted business with the following related parties:
•Prior to its acquisition by the Company, a current subsidiary of the Company advanced funds to an entity owned by an immediate family member of a Senior Vice President of the Company in connection with a land development project. The obligations of the borrower entity to repay the advances are guaranteed by a separate entity owned by the same family member of the officer. Amounts outstanding under the advances do not bear interest and must be repaid in full no later than March 17, 2021 (“Land Development Project”).
•Entities owned by immediate family members of a Senior Vice President of the Company perform subcontract work for a subsidiary of the Company, including trucking and grading services ("(“Subcontracting Services"Services”).
•From time to time, a subsidiary of the Company provides construction services to various companies owned by family members of a Senior Vice President of the Company ("Construction Services").
For periodic corporate events, the Company has chartered a boat from Deep South Adventures, LLC, which is owned by a Senior Vice President of the Company.
The Company rents and purchases vehicles from an entity owned by a family member of a Senior Vice President of the Company ("Vehicles"(“Construction Services”).
Family members of a Senior Vice President of the Company provide consulting services to a subsidiary of the Company ("Consulting Services").
A law firm previously owned by a family member of a Senior Vice President of the Company provided legal services to a subsidiary of the Company ("Legal Services").
A subsidiary of the Company leases office space for its Dothan, Alabama office from H&K, Ltd. ("H&K"), an entity partially owned by a Senior Vice President of the Company. The office space is leased through early 2020. Under the lease agreement, the Company pays a fixed minimum rent per month.
A subsidiary of the Company leased office space for its Montgomery, Alabama office from H&A Properties LLC ("H&A"), an entity partially owned by two Senior Vice Presidents of the Company. Under the lease agreement, the Company paid a fixed minimum rent per month. In September 2018, the subsidiary purchased this office from H&A for $0.5 million.
On•Since June 1, 2014, the Company entered intohas been a party to an access agreement with Island Pond Corporate Services, LLC ("(“Island Pond"Pond”), which provides a location for the Company to conduct business development activities from time to time on a property owned by the Executive Chairman of the Company'sCompany’s Board of Directors, who is alsoDirectors.
•The Company rents and purchases vehicles from an entity owned by a family member of a Senior Vice President of the Managing PartnerCompany (“Vehicles”).
•Family members of SunTx.a Senior Vice President of the Company provide consulting services to a subsidiary of the Company (“Consulting Services”).
•A subsidiary of the Company leased office space for its Dothan, Alabama office from H&K, Ltd. (“H&K”), an entity partially owned by a Senior Vice President of the Company. The office space was originally leased through early 2020, but the subsidiary terminated the lease in June 2019 and paid $15,000 to H&K as consideration for the early termination. Under the lease agreement, the Company paid a fixed minimum rent per month.
•The Company is party to a management services agreement with SunTx, under which the Company pays SunTx $0.25 million per fiscal quarter and reimburses certain travel and other out-of-pocket expenses.expenses associated with services rendered under the management services agreement.

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The following table presents revenues earned and expenses incurred by the Company during the three and six months ended March 31, 20192020 and March 31, 2018, if and to the extent the Company engaged in transactions with the parties described above during the respective periods,2019, and accounts receivable and accounts payable balances at March 31, 20192020 and September 30, 2018,2019, related to transactions with suchthe related parties described above (in thousands):
Revenue Earned (Expense Incurred)Accounts Receivable (Payable)
For the Three Months Ended March 31,For the Six Months Ended March 31,March 31,September 30,
202020192020201920202019
(unaudited)(unaudited)(unaudited)(unaudited)(unaudited)
Purchaser of Subsidiary$—  $—  $—  $—  $725  $756  
Disposed Entity—  —  —  —  462  846  
Land Development Project—  —  —  —  774  774  
Subcontracting Services(1)
(448) (3,073) (2,025) (6,366) (547) (1,238) 
Construction Services254  1,061  1,534  1,174  1,643  2,434  
Island Pond(2)
(80) (80) (160) (160) —  —  
Vehicles(2)
(262) (342) (514) (631) —  —  
Consulting Services(2)
(72) (67) (143) (134) —  —  
H&K(2)
—  (21) —  (42) —  —  
SunTx(2)
(357) (387) (671) (641) —  —  
(1) Cost is reflected as cost of revenues on the Company’s Consolidated Statements of Income.
(2) Cost is reflected as general and administrative expenses on the Company’s Consolidated Statements of Income.


  Revenue Earned (Expense Incurred) Accounts Receivable (Payable)
  For the Three Months Ended March 31, For the Six Months Ended March 31, March 31, September 30,
  2019 2018 2019 2018 2019 2018
  (unaudited) (unaudited) (unaudited) (unaudited) (unaudited)  
Purchaser of subsidiary $—
 $—
 $—
 $—
 $864
 $850
Disposed entity $—
 $—
 $—
 $—
 $952
 $937
Subcontracting Services (1)
 $(3,073) $(1,420) $(6,366) $(4,365) $(973) $(842)
Construction Services $1,061
 $285
 $1,174
 $1,576
 $3,296
 $2,863
Deep South Adventures, LLC (2)
 $—
 $—
 $—
 $(33) $—
 $—
Vehicles (2)
 $(342) $(288) $(631) $(576) $—
 $—
Consulting Services (2)
 $(67) $(56) $(134) $(116) $—
 $—
Legal Services (2)
 $—
 $—
 $—
 $(58) $—
 $—
H&K (2)
 $(21) $(21) $(42) $(42) $—
 $—
H&A (2)
 $—
 $(16) $—
 $(33) $—
 $—
Island Pond (2)
 $(80) $(80) $(160) $(160) $—
 $—
SunTx (2)
 $(387) $(311) $(641) $(651) $—
 $—
             
(1) Cost is reflected as cost of revenues on the Company's Consolidated Statements of Income.
(2) Cost is reflected as general and administrative expenses on the Company's Consolidated Statements of Income.

Note 13 - Settlement Agreement
On April 19, 2018, certain of the Company'sCompany’s subsidiaries entered into settlement agreements with a third party pursuantarising from a business interruption event not directly related to which they willthe Company’s business that the Company does not expect to reoccur (the “Settlement”). The Settlement provides for the Company’s subsidiaries to receive aggregate net payments of approximately $15.7 million. These agreements provided for the payments to be mademillion in four4 equal installments between January 2019 and July 2020, in exchange for releasing and waiving all current and future claims against the third party relating to a business interruption event that occurred more than five years ago that did not directly relate to the Company's business and that has not, and is not expected to, recur (the "Settlement").party. The Company recorded a pre-tax gain of $14.8 million during the six monthsfiscal year ended March 31,September 30, 2018 related to the Settlement. The subsidiaries received the first installment payments in the total amount of $3.9 million in January 2019. Future payments are reflected on the Consolidated Balance SheetSheets at March 31, 2020 and September 30, 2019 as other current assets and other assets in the amount of $7.9$3.9 million and $3.6$7.8 million, respectively.

Note 14 - Equity-Based Compensation
During the fiscal year ending September 30, 2019, the Company awarded a total of 292,534 restricted shares of Class A common stock to its non-employee directors under the Construction Partners, Inc. 2018 Equity Incentive Plan in lieu of cash compensation. The grants are classified as equity awards. The aggregate grant date fair value of these restricted awards was $3.8 million. Two-thirds of the restricted shares of Class A common stock will vest on January 1, 2021, and the remaining one-third will vest on January 1, 2022.
During the three and six months ended March 31, 2020, the Company recorded compensation expense in connection with these grants in the amount of $0.4 million and $0.8 million, respectively, which is reflected as general and administrative expenses in the Company’s Consolidated Statements of Income. At March 31, 2020, there was approximately $2.4 million of unrecognized compensation expense related to these awards.

Note 15 - Leases
The Company leases certain facilities, office space, vehicles and equipment. As of March 31, 2020, operating leases under Topic 842 were included in (i) operating lease right-of-use assets, (ii) current portion of operating lease liabilities and (iii) operating lease liabilities, net of current portion on the Company’s Consolidated Balance Sheets in the amounts of $8.6 million, $2.7 million and $6.1 million, respectively. As of March 31, 2020, the Company had no lease contracts that had not yet commenced but had created significant rights and obligations.

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Lease expense was $0.9 million and $1.8 million during the three months and six months ended March 31, 2020, respectively, which included operating lease costs related to short-term leases. During the three months ended December 31, 2019, the Company used cash in the amount of $11.5 million to buy out certain operating lease obligations.
As of March 31, 2020, the weighted-average remaining term of the Company’s leases was 8.3 years, and the weighted-average discount rate was 4.00%. As of March 31, 2020, the lease liability was equal to the present value of the remaining lease payments, discounted using the incremental borrowing rate on the Company’s secured debt using a single maturity discount rate, as such rate is not materially different from the discount rate applied to each of the leases in the portfolio.

The following table summarizes the Company’s undiscounted lease liabilities outstanding as of March 31, 2020 (in thousands):

Fiscal YearAmount
Remainder of 2020$1,712  
20212,205  
20221,126  
2023716  
2024690  
2025 and thereafter4,051  
Total future minimum lease payments$10,500  
Less: imputed interest1,720  
Total$8,780  

As previously disclosed, the Company’s future minimum lease payment obligations as of September 30, 2019 were as follows (in thousands):

Fiscal YearAmount
2020$6,537  
20213,043  
20221,041  
2023351  
2024255  
Thereafter58  
Total$11,285  

Note 16 - Investment in Derivative Instruments

The Company’s operations expose it to a variety of market risks, including the effects of changes in commodity prices. As part of its risk management process, the Company began entering into commodity swap transactions through regulated commodity exchanges in February 2020.
The Company is exposed to interest rate risk related to its ongoing business operations. To manage interest rate exposure, the Company has entered into derivative instruments using interest rate swaps. The objective of entering into interest rate swaps is to eliminate the variability of cash flows associated with movements in interest rates over the life of the loans.
The following table represents the approximate amount of realized and unrealized gains (losses) and changes in fair value recognized in earnings on commodity derivative contracts for the three and six months ended March 31, 2020 and the fair value of these derivatives as of March 31, 2020 and September 30, 2019 (in thousands):

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For the Three Months Ended March 31, 2020 (unaudited)For the Six Months Ended March 31, 2020 (unaudited)
Change inChange in
Income Statement ClassificationRealized Gain (Loss)Unrealized Gain (Loss)Total Gain (Loss)Realized Gain (Loss)Unrealized Gain (Loss)Total Gain (Loss)
Cost of revenues$(21) $—  $(21) $(21) $—  $(21) 
Other income (expense)—  (797) (797) —  (797) (797) 
Interest expense, net(24) (1,532) (1,556) (49) (1,466) (1,515) 
Total$(45) $(2,329) $(2,374) $(70) $(2,263) $(2,333) 

For the Three Months Ended March 31, 2019 (unaudited)For the Six Months Ended March 31, 2019 (unaudited)
Change inChange in
Income Statement ClassificationRealized Gain (Loss)Unrealized Gain (Loss)Total Gain (Loss)Realized Gain (Loss)Unrealized Gain (Loss)Total Gain (Loss)
Cost of revenues$—  $—  $—  $—  $—  $—  
Other income (expense)—  —  —  —  —  —  
Interest expense, net9  (106) (97) 5  (331) (326) 
Total$9  $(106) $(97) $5  $(331) $(326) 

March 31, 2020September 30, 2019
Balance Sheet Classification(unaudited)
Accrued expense and other current liabilities - commodity swaps$(588) $—  
Other long-term liabilities - commodity swaps$(209) $—  
Other long-term liabilities - interest rate swaps$(1,777) $(311) 
Net gain (loss) position$(2,574) $(311) 


Note 17 - Fair Value Measurements

The following table presents the Company’s liabilities measured at fair value on a recurring basis as of March 31, 2020 and September 30, 2019 under ASC 820 (in thousands):

March 31, 2020September 30, 2019
(unaudited)
Level 2Level 2
Liabilities
Commodity swaps$797  $—  
Interest rate swaps1,777  311  
Derivative liabilities included in Level 2 include commodity and interest rate swap contracts. The fair values of our Level 2 derivative liabilities were determined using market observable inputs including forward and spot prices for commodities and interest rate curves.

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Note 18 - Purchase Commitments
As of March 31, 2020, the Company had unconditional purchase commitments for diesel fuel in the normal course of business in the aggregate amount of $2.6 million. As of March 31, 2020, our purchase commitments for the remainder of fiscal year 2020 and annually thereafter were as follows (in thousands):
Fiscal YearAmount
Remainder of 20201,348  
20211,219  
202251  
Total$2,618  

Note 1419 - Subsequent Events

COVID-19
The Company is closely monitoring the impact of the pandemic of the novel strain of coronavirus, known as COVID-19 ("COVID-19") on all aspects of its business, including how it will impact our customers, employees, suppliers, and vendors. While the Company did not incur significant disruptions during the three months ended March 31, 2020 from COVID-19, due to the uncertainties surrounding the COVID-19 pandemic, it is unable to predict the impact that COVID-19 will have on its financial position, operating results and cash flows in future periods.
Recent financing activities
On April 30, 2020, the Company and each of its wholly owned subsidiaries entered into a Loan Modification Agreement and Amendment to Loan Documents (the “Amendment”), with BBVA and Bank of America.
Among other things, the Amendment amended the Credit Agreement to (i) provide for a Term Loan advance to the Company in the amount of $18.0 million, (ii) establish a minimum interest rate for the foregoing Term Loan advance and future Term Loan advances, (iii) adjust the Term Loan recourse amounts applicable to the Company and its subsidiaries, (iv) increase the amount of the quarterly principal installment payments under outstanding Term Loan advances to $2.5 million, and (v) set forth procedures by which the parties will select a replacement benchmark interest rate in the event that LIBOR, the current benchmark interest rate under the BBVA Credit Agreement, is no longer available or appropriate as a reference rate upon which to determine the interest rate after December 31, 2021, the date on which contributing banks will no longer be required to submit rate information from which LIBOR is calculated.
Conversion of Class B common stock to Class A common stock
Subsequent to March 31, 2019, certain stockholders2020, a stockholder of the Company converted a total of 19,856,313100,000 shares of the Company'sCompany’s Class B common stock, par value $0.001, on a one-for-one1-for-one basis, into shares of the Company'sCompany’s Class A common stock, par value $0.001.stock. Following the conversion, there were 31,806,313 Class A shares and 19,608,306 Class B shares outstanding.

On May 13, 2019, the Company awarded a total of 212,056 restricted32,805,418 shares of Class A common stock to its non-employee directors under the Construction Partners, Inc. 2018 Equity Incentive Plan. The grants are classified as equity awards. The aggregate grant date fair valueand 18,976,327 shares of these restrictedClass B common stock grants was $2.7 million. The grants will vest as to two-thirdsoutstanding.
20
Table of the underlying shares on January 1, 2021 and as to the remaining one-third of the underlying shares on January 1, 2022.Contents


Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
This discussion and analysis of our financial condition and results of operations is intended to assist in understanding and assessing the trends and significant changes in our results of operations and financial condition. Historical results may not be indicative of future performance. This discussion includes forward-looking statements that reflect our plans, estimates and beliefs. Such statements involve risks and uncertainties. Our actual results may differ materially from those contemplated by these forward-looking statements as a result of various factors, including those set forth under the headings “Risk Factors” and “Cautionary Statement Regarding Forward-Looking Statements.” This discussion should be read in conjunction with our unaudited consolidated financial statements and the notes thereto included elsewhere in this Quarterly Report on Form 10-Q and our audited consolidated financial statements and notes thereto included in our 2018the 2019 Form 10-K. In this discussion, we use certain non-GAAP financial measures. ExplanationExplanations of these non-GAAP financial measures and reconciliationreconciliations to the most directly comparable GAAP financial measures are included in this "Management’s“Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Investors should not consider non-GAAP financial measures in isolation or as substitutes for financial information presented in compliance with GAAP.
Overview
We are one of the fastest growinga civil infrastructure companies in the United States, specializingcompany that specializes in the building and maintenance of transportation networks. Our operations leverage a highly skilled workforce, strategically located HMA plants, substantial construction assets and select material deposits. 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 developmentssites in the southeastern United States.
Our public projects are funded by federal, state and local governments and include projects for 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. Federal funds are allocated on a state-by-state basis, and each state is required to match a portion of the federal funds they receive.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.
In addition to public infrastructure projects, we provide a wide range of large sitework construction and HMA paving services to private construction customers, including commercial and residential developers and local businesses.
Recent Developments
COVID-19
We are closely monitoring the impact of the pandemic of the novel strain of coronavirus, known as COVID-19, on all aspects of our business, including its impact on our customers, employees, suppliers, and vendors. While we did not incur significant disruptions from COVID-19 during the three months ended March 31, 2020, due to the uncertainties surrounding the COVID-19 pandemic, we are unable to predict the impact that COVID-19 will have on our financial position, operating results and cash flows in future periods. For instance, a significant portion of the Company’s revenues each quarter are derived from projects completed for various Departments of Transportation. Due to declines in travel and consumer spending resulting from the COVID-19 pandemic, certain Departments of Transportation with whom we do business are generating less tax revenue to spend on construction projects. To date, these developments have not had a material adverse impact on our business. However, if a significant number of our customers are unable to undertake new construction projects or are forced to delay major construction due to the COVID-19 pandemic, our results of operations in future quarters could decline. The extent to which our operations may be impacted by the COVID-19 pandemic will depend largely on future developments, which are highly uncertain and cannot be accurately predicted, including new information that may emerge concerning the severity of the pandemic and actions by government authorities to contain the outbreak or mitigate its impact. Furthermore, the impacts of a potential worsening of economic conditions and the continued disruptions to and volatility in the financial markets remain unknown.

Florida Acquisition

On March 23, 2020, we acquired two HMA manufacturing plants and certain related assets located in Pensacola and Defuniak Springs, Florida. These acquired plants enable us to serve new markets in the western Florida panhandle, and we expect to be able to pursue a variety of public, private and Department of Defense projects from the new locations. For further discussion regarding this transaction, see Note 4 - Business Acquisitions to the Consolidated Financial Statements included elsewhere in this report.

Changes in Value of Derivative Instruments

From time to time, we enter into interest rate swap agreements in order to manage risks associated with changes in interest rates on our outstanding indebtedness and commodity swap agreements in order to manage risks associated with changes in the price of certain commodities used in our business, such as fuel. We record these derivative instruments at their fair value and record changes in the fair value of these instruments in current earnings. During the three months ended March 31, 2020, we incurred a $1.4 million non-cash charge related to interest rate swaps and a $0.8 million non-cash charge related to fuel swaps. The value of these instruments was
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materially impacted by significant volatility in the financial and commodities markets during the quarter, primarily associated with the COVID-19 pandemic and related macroeconomic factors. Given the current uncertainty regarding the duration, scope and magnitude of the impact that COVID-19 will have on the broader economy and how such an impact will affect the value of our derivative instruments, we could incur losses in future periods related to the value of these instruments.

How We Assess Performance of Our Business
Revenues
We derive our revenues predominantly fromby providing construction products and services for both public and private infrastructure projects, with an emphasis on highways, roads, bridges, airports and commercial and residential developments.sites. Our projects represent a mix of federal, state, municipal and private customers. We also generatederive revenues from the sale of HMA, aggregates, ready-mix concrete and aggregatesliquid asphalt cement to customers. Revenues derived from projects are recognized as performance obligations are satisfied over a period of time, on the percentage-of-completion basis, measured byaccording to the relationship of total cost incurred comparedas of a given determination date to the total estimated contract costs (cost-to-cost method).costs. Changes in job performance, job conditions and estimated profitability, including those arising from contract penalty provisions and final contract settlements, may result in revisions to estimated costs and income, and are recognized in the period in which the revisions are determined. Revenues generatedderived from the sale of HMA, aggregates, ready-mix concrete and aggregatesliquid asphalt cement are recognized at the point in time when risks associated with ownership have passed to the customer.
Gross Profit
Gross profit represents revenues less cost of revenues. Cost of revenues consists of all direct and indirect costs onof construction contracts, including raw materials, labor, equipment costs, depreciation, lease expenses, subcontractorsubcontract costs and other expenses at our HMA plants, and aggregate mining facilities.facilities and liquid asphalt terminal. Our cost of revenues is directly affected by fluctuations in commodity prices, primarily liquid asphalt and diesel fuel. From time to time, when appropriate, we limit our exposure to changes in commodity prices by entering into forward purchase commitments. In addition, our public infrastructure contracts often provide for price adjustments based on fluctuations in certain commodity-related product costs. These price adjustment provisions are in place for most of our public infrastructure contracts, and we seek to include similar provisions in our private contracts.

Depreciation, Depletion and Amortization
We carry property, plant and equipment on our balance sheet at cost, net of accumulated depreciation, depletion and amortization. Depreciation on property, plant and equipment is computed on a straight-line basis over the estimated useful life of the asset. Amortization expense is the periodic expense related to leasehold improvements and intangible assets. Leasehold improvements are amortized over the lesser of the life of the underlying asset or the remaining lease term. Our intangible assets 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. Quarry reserves are depleted in accordance with the units-of-production method as aggregate is extracted, using the initial allocation of cost based on proven and probable reserves.
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 and consist primarily of salaries and personnel costs for our administration, finance and accounting, legal, information systems, human resources and certain managerial employees. Additional expenses include audit, consulting and professional fees, travel, insurance, office space rental costs, property taxes and other corporate and overhead expenses.
Gain on Sale of Equipment, netNet
In the normal course of business, we sell construction equipment for various reasons, including when the cost of maintaining the asset exceeds the cost of replacing it. The gain or loss on sale of equipment reflects the difference between the carrying value at the date of disposal and the net consideration received from the sale of equipment during the period.
Interest Expense, netNet
Interest expense, net primarily represents interest incurred on our long-term debt, such as the Compass Term Loan and the Compass Revolving Credit Facility, as well as the cost of interest swap agreements and amortization of deferred debt issuance costs. These amounts are partially offset by interest income earned on short-term investments of cash balances in excess of our current operating needs.
Other Key Performance IndicatorsIncome (Expense)
Other income (expense) primarily represents unrealized gains (losses) on commodity derivative instruments and other miscellaneous income (expense) items.
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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 and amortization of long-lived assets, (iv) equity-based compensation expense, (v) loss on extinguishment of debt and (v)(vi) certain management fees and expenses, and excludes income recognized in connection with the Settlement (see Note 13 - Settlement Agreement to the consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q).expenses. Adjusted EBITDA Margin represents Adjusted EBITDA as a percentage of revenues for each period. Adjusted EBITDA and Adjusted EBITDA MarginThese metrics are supplemental measures of our operating performance that are neither required by, nor presented in accordance with, GAAP. These measures have limitations as analytical tools and should not be considered in isolation or as an alternative to net income or any other performance measure derived in accordance with GAAP as an indicator of our operating performance. We present Adjusted EBITDA and Adjusted EBITDA Margin because management uses these measures as key performance indicators, and believes they are measures frequently used bywe believe that securities analysts, investors and other partiesothers use these measures to evaluate companies in our industry. These measures have limitations as analytical tools and should not be considered in isolation or as substitutes for analysis of our results as reported under GAAP.
Our calculation of Adjusted EBITDA and Adjusted EBITDA Margin may not be comparable to similarly named measures reported by other companies. Potential differences between our measure of Adjusted EBITDA and other companies' measures of Adjusted EBITDA may include differences in capital structures, tax positions and the age and book depreciation of intangible and tangible assets.

The following table presents a reconciliation of Adjusted EBITDA to net income, the most directly comparable measure calculated in accordance with GAAP, to Adjusted EBITDA, and the calculation of Adjusted EBITDA Margin for each of the periods presented (in thousands, except percentages):
For the Three Months Ended March 31,For the Six Months Ended March 31,
2020201920202019
Net income$1,537  $4,212  $6,998  $9,366  
Interest expense, net1,834  379  2,115  894  
Provision for income taxes531  1,488  1,850  3,139  
Depreciation, depletion and amortization of long-lived assets9,593  7,501  19,031  14,639  
Equity-based compensation expense390  —  785  —  
Management fees and expenses (1)
357  387  671  641  
Adjusted EBITDA$14,242  $13,967  $31,450  $28,679  
Revenues$168,679  $164,304  $343,993  $318,631  
Adjusted EBITDA Margin8.4 %8.5 %9.1 %9.0 %
(1)Reflects fees and reimbursement of certain travel expenses under a management services agreement with SunTx (see Note 12 - Related Parties to the consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q).
23
  For the Three Months Ended March 31, For the Six Months Ended March 31,
  2019 2018 2019 2018
Net income $4,212
 $11,248
 $9,366
 $22,244
Interest expense, net 379
 253
 894
 550
Provision for income taxes 1,488
 4,770
 3,139
 3,973
Depreciation, depletion and amortization of long-lived assets 7,501
 5,633
 14,639
 11,308
Equity-based compensation expense —
 604
 —
 604
Settlement income (1)
 —
 (14,803) —
 (14,803)
Management fees and expenses (2)
 387
 311
 641
 651
Adjusted EBITDA $13,967
 $8,016
 $28,679
 $24,527
Revenues $164,304
 $118,889
 $318,631
 $269,320
Adjusted EBITDA Margin 8.5% 6.7% 9.0% 9.1%
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(1)
Represents pre-tax income recognized in connection with the Settlement.
(2)
Reflects fees and reimbursement of certain travel expenses under a management services agreement with SunTx (see Note 12 - Related Parties to the consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q).

Results of Operations
Three Months Ended March 31, 20192020 Compared to Three Months Ended March 31, 20182019
The following table sets forth selected financial data for the three months ended March 31, 20192020 and March 31, 20182019 (in thousands, except percentages):
Change From the Three Months Ended
For the Three Months Ended March 31,March 31, 2019
to the Three Months Ended
20202019March 31, 2020
Dollars% of
Revenues		Dollars% of
Revenues		$ 
Change		%
Change
Revenues$168,679  100.0 %$164,304  100.0 %$4,375  2.7 %
Cost of revenues147,708  87.6 %144,503  87.9 %3,205  2.2 %
Gross profit20,971  12.4 %19,801  12.1 %1,170  5.9 %
General and administrative expenses(16,821) (10.0)%(14,771) (9.0)%(2,050) 13.9 %
Gain on sale of equipment, net435  0.3 %693  0.4 %(258) (37.2)%
Operating income4,585  2.7 %5,723  3.5 %(1,138) (19.9)%
Interest expense, net(1,834) (1.1)%(379) (0.2)%(1,455) 383.9 %
Other income (expense)(753) (0.4)%123  — %(876) (712.2)%
Income before provision for income taxes and earnings from investment in joint venture1,998  1.2 %5,467  3.3 %(3,469) (63.5)%
Provision for income taxes531  0.3 %1,488  0.9 %(957) (64.3)%
Earnings from investment in joint venture70  — %233  0.2 %(163) (70.0)%
Net income$1,537  0.9 %$4,212  2.6 %$(2,675) (63.5)%
Adjusted EBITDA$14,242  8.4 %$13,967  8.5 %$275  2.0 %
         Change from the Three Months Ended March 31, 2018
 For the Three Months Ended March 31, 
  to the Three Months Ended March 31, 2019
 2019 2018 
 Dollars % of
Revenues		 Dollars % of
Revenues		 
$ 
Change
 %
Change
Revenues$164,304
 100.0 % $118,899
 100.0 % $45,405
 38.2 %
Cost of revenues144,503
 87.9 % 105,150
 88.4 % 39,353
 37.4 %
Gross profit19,801
 12.1 % 13,749
 11.6 % 6,052
 44.0 %
General and administrative expenses(14,771) (9.2)% (13,358) (11.3)% (1,413) 10.6 %
Settlement income—
 — % 14,803
 12.5 % (14,803) N/A
Gain on sale of equipment, net693
 0.4 % 886
 0.7 % (193) (21.8)%
Operating income5,723
 3.4 % 16,080
 13.5 % (10,357) (64.4)%
Interest expense, net(379) (0.2)% (253) (0.2)% (126) 49.8 %
Other income (expense), net123
 0.1 % (39) — % 162
 (415.4)%
Income before provision for income taxes and earnings from investment in joint venture5,467
 3.3 % 15,788
 13.3 % (10,321) (65.4)%
Provision for income taxes1,488
 0.9 % 4,770
 4.0 % (3,282) (68.8)%
Earnings from investment in joint venture233
 0.2 % 230
 0.2 % 3
 N/A
Net income$4,212
 2.6 % $11,248
 9.5 % $(7,036) (62.6)%
Adjusted EBITDA$13,967
 8.5 % $8,016
 6.7 % $5,951
 74.2 %
Revenues. Revenues for the three months ended March 31, 20192020 increased $45.4$4.4 million, or 38.2%2.7%, to $164.3$168.7 million from $118.9$164.3 million for the three months ended March 31, 2018, including $18.32019. The increase included $11.6 million of revenues attributable to Scruggs, which we acquiredacquisitions completed subsequent to March 31, 2018. Revenues2019, which were higher due to more favorable working conditions during the three months ended March 31, 2019 compared to the three months ended March 31, 2018, when most ofoffset by a $7.2 million decrease in revenues in our markets experienced extended cold weather delays. During the three months ended March 31, 2019, the Company was also able to complete work on projects that were delayed in the quarter ended December 31, 2018 due to sustained adverse weather conditions.existing markets.
Gross Profit. Gross profit for the three months ended March 31, 20192020 increased $6.1$1.2 million, or 44.0%5.9%, to $19.8$21.0 million from $13.7$19.8 million for the three months ended March 31, 2018.2019. The increase in gross profit was primarily the result of anthe 2.7% increase in revenue as discussed above and an increase in gross profit margin to 12.1%revenues for the three months ended March 31, 2019 from 11.6% for the three months ended March 31, 2018. The higher gross profit margin was a result of increased HMA production and equipment utilization resulting in an increase of fixed cost absorption during the three months ended March 31, 20192020 compared to the three months ended March 31, 2018.2019 and an increase in the gross profit margin.
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. General and administrative expenses for the three months ended March 31, 20192020 increased $1.4$2.0 million, or 10.6%13.9%, to $14.8$16.8 million from $13.4$14.8 million for the three months ended March 31, 2018.2019. The increase was primarily due to (i) $0.8 million ofin general and administrative expenses attributable to Scruggs, which we acquired subsequent to March 31, 2018 and (ii) a $0.7 million increase in the cost of professional services and insurance, reflecting our growth and increased regulatory and reporting requirements due to becoming a public company subsequent to March 31, 2018. These increases were partially offset by a $0.6 million decrease in equity-based compensation expense.
Settlement Income. Duringfor the three months ended March 31, 2018, we recorded settlement income of $14.8 million reflecting the net present value of future payments to be received in connection with the Settlement, which resolved conditions that existed at March 31,

2018. Pursuant2020 compared to the Settlement, we will receive aggregate net paymentsthree months ended March 31, 2019 was primarily the result of approximately $15.7 million. The first of four equal installments was received(i) a $0.7 million increase in Januarymanagement personnel payroll and benefits, (ii) a $0.7 million increase attributable to acquisitions completed subsequent to March 31, 2019 and remaining installments are scheduled to be received(iii) a $0.4 million increase in July 2019, January 2020 and July 2020.stock-based compensation expense.
Interest Expense, Net. Interest expense, net for the three months ended March 31, 20192020 increased $0.1$1.4 million, to $0.4$1.8 million compared to $0.3$0.4 million for the three months ended March 31, 2018.2019. The increase in interest expense, net reflects a $0.5 million increase in interest expense, partially offset by a $0.4 million increase in interest income. The increase in interest expense, net was primarily due to an increase in the average principal debt balance outstanding to $57.7unrealized loss on interest rate swap derivative instruments of $1.5 million for the three months ended March 31, 2019 from $48.82020 compared to $0.1 million for the three months ended March 31, 2018. In addition, the change in the fair value of interest rate swaps during the three months ended March 31, 2019, resulted in a $0.1 million charge to interest expense, compared to a $0.2 million credit to interest expense during the three months ended March 31, 2018. The increase in interest2019.
Other Income (Expense). Other income was due to the higher average cash balance during the three months ended March 31, 2019, resulting from proceeds attributable to our IPO, which occurred subsequent to March 31, 2018.
Provision for Income Taxes. Our effective tax rate decreased to 26.1%(expense) for the three months ended March 31, 2019, from 29.8%2020 decreased $0.9 million, to $(0.8) million compared to $0.1 million for the three months ended March 31, 2018. Our lower effective tax rate2019. The decrease was primarily attributable to net unrealized losses of $0.8 million on commodity derivative instruments for the three months ended March 31, 2019 was primarily2020, as the Company entered into these contracts in February 2020. These derivative instruments were significantly impacted by financial market volatility during March 2020 due to the lower United States federal corporate income tax rate resulting from the Tax Act. The Tax Act included broadCOVID-19 and complex changes to the United States tax code, including a reduction in the United States federal corporate income tax rate from 35.0% to 21.0% effective January 1, 2018. As a resultother macroeconomic factors.

24
Table of this change, the Company recorded its income tax provision for the three months ended March 31, 2018 based on a blended U.S. statutory rate of 24.5%, which represents a proration of the applicable tax rates before and after the effective date of the Tax Act and the effect of applicable state income taxes. The effective tax rate for the three months ended March 31, 2019 reflects a federal income tax provision based on the United States statutory tax rate of 21.0% and the effect of applicable state income taxes.Contents
Earnings from Investment in Joint Venture. During the three months ended March 31, 20192020 and the three months ended March 31, 2018,2019, we earned $0.07 million and $0.2 million, respectively, of pre-tax income from our 50% interest in the earnings of a joint venture that we entered into with a third party in November 2017 for the sole purpose of performing a construction project for the Alabama Department of Transportation.

Net Income. Net income decreased $7.0$2.7 million, or 62.6%63.5%, to $1.5 million for the three months ended March 31, 2020, compared to $4.2 million for the three months ended March 31, 2019,2019. The decrease in net income was primarily a result of total unrealized losses on commodity and interest rate swap derivative instruments of $2.3 million compared to $11.2$0.1 million for the three months ended March 31, 2018. This decrease in net income was a result of2019, and the $10.6higher general and administrative expenses, all as described above.
Adjusted EBITDA and Adjusted EBITDA Margin. Adjusted EBITDA and Adjusted EBITDA Margin were $14.2 million settlement income, net of tax, recognized duringand 8.4%, respectively, for the three months ended March 31, 2018 and higher general and administrative expenses during the three months ended March 31, 20192020, compared to the three months ended March 31, 2018. The decrease was partially offset by an increase in gross profit and a decrease in the effective tax rate during the three months ended March 31, 2019 compared to the three months ended March 31, 2018, all as described above.
Adjusted EBITDA and Adjusted EBITDA Margin. Adjusted EBITDA and Adjusted EBITDA Margin were $14.0 million and 8.5%, respectively, for the three months ended March 31, 2019, compared to $8.0 million and 6.7%, respectively, for the three months ended March 31, 2018.2019. The increase in Adjusted EBITDA for the three months ended March 31, 2019 compared to the three months ended March 31, 2018 was the result of a higher gross profit and depreciation, depletion and amortization of long-lived assets, partially offset by an increase in general and administrative expenses. The higher Adjusted EBITDA Margin was a resultexpenses and an unrealized loss of a higher gross profit percentage and lower general and administrative expenses percentage for$0.8 million on commodity derivatives during the three months ended March 31, 2019.2020. The lower Adjusted EBITDA Margin was a primarily a result of an increase in general and administrative expenses and unrealized losses of $0.8 million on commodity derivatives during the three months ended March 31, 2020. See the description of Adjusted EBITDA and Adjusted EBITDA Margin, as well as a reconciliation of Adjusted EBITDA to net income, under the heading “How We Assess Performance of Our Business”.

Six Months Ended March 31, 20192020 Compared to Six Months Ended March 31, 20182019
The following table sets forth selected financial data for the six months ended March 31, 20192020 and March 31, 20182019 (in thousands, except percentages):
Change From the Six Months Ended
For the Six Months Ended March 31,March 31, 2019
to the Six Months Ended
20202019March 31, 2020
Dollars% of
Revenues		Dollars% of
Revenues		$ 
Change		%
Change
Revenues$343,993  100.0 %$318,631  100.0 %$25,362  8.0 %
Cost of revenues299,265  87.0 %277,702  87.2 %21,563  7.8 %
Gross profit44,728  13.0 %40,929  12.8 %3,799  9.3 %
General and administrative expenses(33,934) (9.8)%(29,202) (9.1)%(4,732) 16.2 %
Gain on sale of equipment, net744  0.2 %1,027  0.3 %(283) (27.6)%
Operating income11,538  3.4 %12,754  4.0 %(1,216) (9.5)%
Interest expense, net(2,115) (0.6)%(894) (0.3)%(1,221) 136.6 %
Other income (expense)(688) (0.3)%106  0.1 %(794) (749.1)%
Income before provision for income taxes and earnings from investment in joint venture8,735  2.5 %11,966  3.8 %(3,231) (27.0)%
Provision for income taxes1,850  0.5 %3,139  1.0 %(1,289) (41.1)%
Earnings from investment in joint venture113  — %539  0.1 %(426) (79.0)%
Net income$6,998  2.0 %$9,366  2.9 %$(2,368) (25.3)%
Adjusted EBITDA$31,450  9.1 %$28,679  9.0 %2,771  9.7 %
         Change from the Six Months Ended March 31, 2018
 For the Six Months Ended March 31, 
  to the Six Months Ended March 31, 2019
 2019 2018 
 Dollars % of
Revenues		 Dollars % of
Revenues		 $ 
Change		 %
Change
Revenues$318,631
 100.0 % $269,320
 100.0 % $49,311
 18.3 %
Cost of revenues277,702
 87.2 % 232,773
 86.4 % 44,929
 19.3 %
Gross profit40,929
 12.8 % 36,547
 13.6 % 4,382
 12.0 %
General and administrative expenses(29,202) (9.2)% (25,784) (9.6)% (3,418) 13.3 %
Settlement income—
 — % 14,803
 5.5 % (14,803) N/A
Gain on sale of equipment, net1,027
 0.3 % 1,031
 0.4 % (4) (0.4)%
Operating income12,754
 3.9 % 26,597
 9.9 % (13,843) (52.0)%
Interest expense, net(894) (0.3)% (550) (0.2)% (344) 62.5 %
Loss on extinguishment of debt—
 — % —
 — % —
 — %
Other income (expense), net106
 0.2 % (60) (0.1)% 166
 (276.7)%
Income before provision for income taxes and earnings from investment in joint venture11,966
 3.8 % 25,987
 9.6 % (14,021) (54.0)%
Provision for income taxes3,139
 1.0 % 3,973
 1.5 % (834) (21.0)%
Earnings from investment in joint venture539
 0.1 % 230
 0.2 % 309
 N/A
Net income9,366
 2.9 % $22,244
 8.3 % $(12,878) (57.9)%
Adjusted EBITDA$28,679
 9.0 % $24,527
 9.1 % $4,152
 16.9 %
Revenues. Revenues for the six months ended March 31, 20192020 increased $49.3$25.4 million, or 18.3%8.0%, to $318.6$344.0 million from $269.3$318.6 million for the six months ended March 31, 2018, including $34.72019. The increase included $24.7 million of revenues attributable to Scruggs, which we acquiredacquisitions completed subsequent to March 31, 2018. The remaining revenue increase of $14.6 million was due to a higher backlog of construction projects at the beginning of the current fiscal year compared to the backlog at the beginning of the prior fiscal year.2019.
Gross Profit. Gross profit for the six months ended March 31, 20192020 increased $4.4$3.8 million, or 12.0%9.3%, to $40.9$44.7 million from $36.5$40.9 million for the six months ended March 31, 2018.2019. The higherincrease in gross profit was primarily the result of the 18.3%8.0% increase in revenues, partially offset by a decrease in gross profit margin to 12.8%revenue for the six months ended March 31, 2019 from 13.6% for the six months ended March 31, 2018. The decrease in gross profit margin was attributable2020 compared to a decline in the margin achieved on construction projects during the six months ended March 31, 2019 compared to the six months ended March 31, 2018.and an increase in gross profit margin.
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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. General and administrative expenses for the six months ended March 31, 20192020 increased $3.4$4.7 million, or 13.3%16.2%, to $29.2$33.9 million from $25.8$29.2 million for the six months ended March 31, 2018.2019. The increase in general and administrative expenses for the six months ended March 31, 20192020 compared to the six months ended March 31, 20182019 was primarily the result of (i) $1.7a $2.1 million increase in overhead expensemanagement personnel payroll and benefits, (ii) a $1.5 million increase attributable to Scruggs, which we acquiredacquisitions completed subsequent to March 31, 2018,2019 and (ii) an(iii) a $0.8 million increase in the cost of professional services and insurance, reflecting our growth and increased reporting and regulatory requirements due to becoming a public company subsequent to March 31, 2018.stock-based compensation expense.
Interest Expense, Net. Interest expense, net for the six months ended March 31, 20192020 increased $0.3$1.2 million, or 62.5%136.6%, to $0.9$2.1 million compared to $0.6$0.9 million for the six months ended March 31, 2018.2019. The increase in interest expense, net reflects a $1.1 million increase in interest expense, partially offset by a $0.8 million increase in interest income. The increase in interest expense was primarily due to an increase in the average principal debt balance outstanding to $59.6unrealized loss on interest rate swap derivative instruments of $1.5 million for the six months ended March 31, 2019 from $52.52020 compared to $0.3 million for the six months ended March 31, 2018. During2019.
Other Income (Expense). Other income (expense) for the six months ended March 31, 2019, the change in the fair value of the interest rate swaps resulted in a $0.32020 decreased $0.8 million, charge to interest expense$(0.7) million compared to a $0.4$0.1 million credit duringfor the six months ended

March 31, 2018.2019. The increase in interest incomedecrease was dueprimarily attributable to net unrealized losses of $0.8 million on commodity derivative instruments for the higher average cash balance during the threesix months ended March 31, 2019, resulting from proceeds attributable2020, as the Company entered into these contracts in February 2020. These derivative instruments were significantly impacted by financial market volatility during March 2020 due to our IPO, which occurred subsequent to March 31, 2018.COVID-19 and other macroeconomic factors.
Provision for Income Taxes. Our effective tax rate increaseddecreased to 20.9% for the six months ended March 31, 2020, from 25.1% for the six months ended March 31, 2019, from 15.2% for the six months ended March 31, 2018.2019. Our lower effective tax rate forwas the six months ended March 31, 2018 was primarily due toresult of filing an amended consolidated state return, as a result of which the lower United States federal corporate income tax rate resulting the Tax Act. The Tax Act included broad and complex changes to the United States tax code, including a reduction in the United States federal corporate income tax rate from 35.0% to 21.0% effective January 1, 2018. WeCompany recorded a provisional discrete taxan amended return benefit of $3.5$0.4 million related to the Tax Act, primarilyutilization of net operating loss carryforwards and related to adjusting our United States deferred tax liabilities by the same amount, reflecting the reduction in the United States federal corporate income tax rate. We completed our accounting for the income tax effectsrelease of the Tax Act in subsequent periods during fiscal 2018, resulting in a discrete tax benefit of $4.6 million for the full fiscal year. This net reduction in deferred tax liabilities also included the estimated impact on the Company's net state deferred tax assets. Accordingly, the effective tax rate for the six months ended March 31, 2018 reflects a federal income tax provision based on the blended United States statutory tax rate of 24.5%, the $3.5 million tax benefit related to the Tax Act and the effect of applicable state income taxes. The effective tax rate for the six months ended March 31, 2019 reflects a federal income tax provision based on the United States statutory tax rate of 21.0% and the effect of applicable state income taxes.valuation allowance.

Earnings from Investment in Joint Venture. During the six months ended March 31, 20192020 and the six months ended March 31, 2018,2019, we earned $0.1 million and $0.5 million, and $0.2 millionrespectively, of pre-tax income from our 50% interest in the earnings of a joint venture that we entered into with a third party in November 2017 for the sole purpose of performing a construction project for the Alabama Department of Transportation.
Net Income. Net income decreased $12.9$2.4 million, or 57.9%25.3%, to $7.0 million for the six months ended March 31, 2020, compared to $9.4 million for the six months ended March 31, 2019, compared to $22.22019. The decrease in net income was primarily a result of total unrealized losses on commodity and interest rate swap derivative instruments of $2.3 million for the six months ended March 31, 2018. This decrease in net income was a result of the $10.62020 compared to $0.3 million settlement income, net of tax, recognized during the six months ended March 31, 2018 and higher general and administrative expenses duringfor the six months ended March 31, 2019, compared toand the three months ended March 31, 2018. The decrease was partially offset by an increase in gross profithigher general and administrative expenses, all as described above.
Adjusted EBITDA and Adjusted EBITDA Margin. Adjusted EBITDA and Adjusted EBITDA Margin were $31.5 million and 9.1%, respectively, for the six months ended March 31, 2020, compared to $28.7 million and 9.0%, respectively, for the six months ended March 31, 2019, compared to $24.5 million and 9.1%, respectively, for the six months ended March 31, 2018.2019. The increase in Adjusted EBITDA for the six months ended March 31, 2019 compared to the three months ended March 31, 2018 was the result of a higher gross profit and depreciation, depletion and amortization of long-lived assets, partially offset by an increase in general and administrative expenses.expenses and an unrealized loss on interest rate swap derivative instruments of $1.5 million for the six months ended March 31, 2020 compared to $0.3 million for the six months ended March 31, 2019. The higher Adjusted EBITDA Margin was a primarily a result of increased depreciation, depletion and amortization of long-lived assets during the six months ended March 31, 2020. See the description of Adjusted EBITDA and Adjusted EBITDA Margin, as well as a reconciliation of Adjusted EBITDA to net income, under the heading "How“How We Assess Performance of Our Business"Business”.
Inflation and Price Changes
Inflation had an immaterial impact on our results of operations for thethree and six months ended March 31, 20192020 and 20182019 due to relatively low inflation in the United States in recent years and our ability to recover increasing costs by obtaining higher prices for our products, including sale price escalator clauses in most of our public constructionsector infrastructure contracts. Inflation risk varies with the level of activity in our industry, the number, size and strength of competitors and the availability of products to supply a local market.
Liquidity and Capital Resources
Cash Flows Analysis
The following table sets forth our cash flows for the periods indicated (in thousands):
For the Six Months Ended March 31,
20202019
Net cash provided by operating activities, net of acquisition$20,476  $5,299  
Net cash used in investing activities(62,784) (35,119) 
Net cash provided by (used in) financing activities15,483  (7,406) 
Net change in cash and cash equivalents$(26,825) $(37,226) 
26
 For the Six Months Ended March 31,
 2019 2018
Net cash provided by operating activities, net of acquisition$5,299
 $28,124
Net cash used in investing activities(35,119) (19,879)
Net cash used in financing activities(7,406) (9,995)
Net change in cash and cash equivalents$(37,226) $(1,750)
    
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Operating Activities
Cash provided by operating activities was $20.5 million for the six months ended March 31, 2020, an increase of $15.2 million compared to $5.3 million for the six months ended March 31, 2019, a decrease of $22.8 million compared to $28.1 million for the six months ended March 31, 2018.2020. The decreaseincrease was primarily due to a $12.9$7.8 million increase in adjustments to reconcile net income to cash flows provided by operating activities and a $9.7 million increase in changes in operating assets and liabilities, partially offset by a $2.4 million decrease in net income for the six months ended March 31, 20192020 compared to the six months ended March 31, 2018 and a $15.9 million reduction in changes in operating assets and liabilities, partially offset by a $5.92019. The $7.8 million increase in adjustments to reconcile net income to cash flows fromprovided by operating activities for those same periods.was primarily due to a $4.4 million increase in depreciation, depletion and amortization of long-lived assets and a $1.9 million increase in losses on derivative instruments and $0.8 million increase of equity-based compensation expense. The decrease$9.7 million increase in changes in operating assets and liabilities included (i) a $14.5$2.2 million reductionincrease in contracts receivable including retainage for the six months ended March 31, 2019 compared to a $44.8 million reduction for the six months ended March 31, 2018, due to higher overall revenue, especially duringnormal fluctuations resulting from the three months ended March 31, 2019 compared to the three months ended March 31, 2018,timing of processing transactions in our accounts receivable cycle, (ii) a $4.6 million additional increase in inventory relatedprepaid expenses and other current assets due to operationsthe receipt of the liquid asphalt terminal subsequent to acquisition in February 2019,settlement receivable and timing of insurance policies, (iii) a $4.1$3.5 million decrease in other assets for the six months ended March 31, 2019 compared to a $12.0 million increase for the six months ended March 31, 2018, primarily reflecting recognition of receivables in connection with settlement income. Changes in adjustments to reconcile net income to cash flows from operating activities were primarilyaccounts payable due to normal fluctuations in the $3.5 million lesser reductiontiming of processing transactions in net deferred income tax liabilities, due to the discrete tax benefit recognized during the six months ended March 31, 2018 reflecting the effects of the Tax Actour accounts payable cycle and (iv) a $3.3 million increase in depreciation, depletion and amortization of long-lived assets, primarilyinventories due to the increasenormal fluctuations in property, plant and equipment resulting from the Scruggs Acquisition, which was completed subsequent to March 31, 2018.our inventory cycle.
Investing Activities
Cash used in investing activities was $62.8 million for the six months ended March 31, 2020 compared to $35.1 million for the six months ended March 31, 2019. The increase reflects $17.7 million used in connection with a business acquisition in October 2019 compared to $19.9and $12.4 million used in connection with a business acquisition in March 2020. Business acquisitions totaled $8.9 million for the six months ended March 31, 2018. The2019. There was a $14.7 million increase reflects $10.9in purchases of property, plant and equipment, which includes $11.5 million used infor the acquisitionbuyout of liquid asphalt terminal assets and $8.9 million used in the acquisition of a businessequipment leases during the six months ended March 31, 2019. The increase was partially2020. These increases were offset by a $2.2$8.9 million lower investment in property, plant and equipmentbusiness acquisition and a $1.8$10.8 million distribution received from an investment in a joint ventureacquisition of the liquid asphalt terminal assets during the six months ended March 31, 2019 compared to the six months ended March 31, 2018.2019.
Financing Activities
Cash used inprovided by financing activities was $7.4$15.5 million for the six months ended March 31, 20192020 compared to $10.0$7.4 million of cash used in financing activities during the six months ended March 31, 2018,2019, reflecting a $5.0$9.8 million repaymentTerm Loan advance, net of debtissuance cost, related to our buyout of certain lease obligations in October 2019 and a $15.0 million advance under our Compass Revolving Credit Facility net of a $2.4primarily used to fund the March 2020 acquisition and for liquidity purposes. Loan repayments increased $1.9 million lower repayment ofon the Compass Term Loan, Revolving Credit Facility and other debt during the six months ended March 31, 20182020 compared to the six months ended March 31, 2019.
CompassBBVA Credit Agreement
On June 30, 2017, CPHI,We and each of our wholly owned subsidiary, entered intosubsidiaries are parties to the CompassBBVA Credit Agreement, with Compass Bank as agent (the "Agent"), sole lead arranger and sole bookrunner, providingwhich provides for a $50.0 million Compassthe Term Loan and a $30.0 million Compassthe Revolving Credit Facility.In connection with the Scruggs Acquisition, At March 31, 2020 and September 30, 2019, we amended the Compass Credit Agreement on May 15, 2018had $50.6 million and borrowed an additional $22.0$44.7 million, respectively, of principal outstanding under the Compass Term Loan, to fund a portion$15.0 million and $5.0 million, respectively, of the purchase price. The principal amount of the Compass Term Loan, including the additional borrowing, must be paid in quarterly installments of $3.6 million. All amounts borrowedoutstanding under the CompassRevolving Credit Agreement mature on July 1, 2022.
CPHI’sFacility, and availability of $4.0 million and $14.3 million, respectively, under the Revolving Credit Facility, after reduction for outstanding letters of credit. Our obligations under the CompassTerm Loan and the Revolving Credit Agreement are guaranteed by the Company and all of CPHI's direct and indirect subsidiaries andFacility are secured by a first priority security interestsinterest in substantially all of the Company'sour assets.
In August 2019, the BBVA Credit Agreement was amended to, among other things, modify the interest rate and fee structure, as well as the repayment schedule and amounts. In October 2019, the BBVA Credit Agreement was amended to add Bank of America as a party in connection with the assignment by BBVA to Bank of America of certain of its lending obligations under the BBVA Credit agreement and extend the maturity date for the outstanding term loan advances from July 1, 2022 to October 1, 2024. As of March 31, 2020, the BBVA Credit Agreement provided for a four-tier escalating interest rate for both the Term Loan and the Revolving Credit Facility that is tied to LIBOR. The baseline rate for such borrowings was LIBOR plus 1.20%, and the rate may increase up to LIBOR plus 1.70% if the Company’s consolidated leverage ratio exceeds 2.00%. At March 31, 20192020 and September 30, 2018,2019, the interest rate on outstanding borrowings under the Compass Term Loan and Compass Revolving Credit Facility was 4.499%2.189% and 4.242%3.244%, respectively. Principal repayments under the Term Loan are made in quarterly installments in an amount equal to 2.50% of the original amount borrowed, a reduction from the 5.00% rate that we paid prior to the August 2019 amendment. We pay a commitment fee of 0.20% per annum on the aggregate unused commitment amount under the Revolving Credit Facility, a reduction from 0.35% prior to the August 2019 amendment, as well as fees with respect to any letters of credit issued thereunder. As of March 31, 2020, all amounts borrowed under the BBVA Credit Agreement were scheduled to mature on October 1, 2024.
On April 30, 2020, we entered into the Amendment, which, among other things, amends the Credit Agreement to (i) provide for a Term Loan advance to the Company in the amount of $18.0 million, (ii) establish a minimum interest rate for the foregoing Term Loan advance and future Term Loan advances, (iii) adjust the Term Loan recourse amounts applicable to the Company and its subsidiaries, (iv) increase the amount of the quarterly principal installment payments under outstanding Term Loan advances to $2.5 million, and (v) set forth procedures by which the parties will select a replacement benchmark interest rate in the event that LIBOR is no longer
27
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available or appropriate as a reference rate upon which to determine the interest rate after December 31, 2021, the date on which contributing banks will no longer be required to submit rate information from which LIBOR is calculated.
The BBVA Credit Agreement contains usual and customary negative covenants for agreements of this type, including, but not limited to, restrictions on the Company’s ability to make acquisitions, make loans or advances, make capital expenditures and investments, pay dividends, create or incur indebtedness, create liens, wind up or dissolve, consolidate, merge or liquidate, or sell, transfer or dispose of assets. The BBVA Credit Agreement also requires the Company 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 2.75-to-1.00, subject to certain adjustments. At March 31, 20192020 and September 30, 2018, we had availability of $14.32019, our fixed charge ratio was 3.17-to-1.00 and $14.0 million,4.04-to-1.00, respectively, and our consolidated leverage ratio was 0.83-to-1.00 and 0.66-to-1.00, respectively. At both March 31, 2020 and September 30, 2019, the Company was in compliance with all covenants under the Compass RevolvingBBVA Credit Facility, including reduction for outstanding letters of credit. In orderAgreement.
From time to time, we have entered into interest rate swap agreements to hedge against the risk of changes in interest rates, on June 30, 2017, werates. On February 27, 2020, the Company entered into an amortizing $25.0additional $26.3 million notional interest rate swap agreement applicable to outstanding debt under the Compass Term Loan on that date, under which we pay a fixed percentage rate of 2.015%1.24% and receive a credit based on the applicable LIBOR rate. In connection with the amendment to the Compass Credit Agreement and the additional borrowing on May 15, 2018, we entered into an additional $11.0 million notional
These interest rate swap agreement applicable toagreements do not meet the $22.0 million of additional debt under the Compass Term Loan. Under this additional swap agreement, we pay a fixed percentage rate of 3.01% and receive a credit based on the applicable LIBOR rate.criteria for hedge accounting treatment in accordance with GAAP. At March 31, 20192020 and September 30, 2018,2019, the aggregate notional value of these interest rate swap agreements was $25.1$50.6 million and $28.7$21.5 million, respectively, and the fair value was $(0.1)$(1.8) million and $0.3$(0.3) million, respectively, which is included within other assetslong-term liabilities on our Consolidated Balance Sheets. We must pay a commitment fee of 0.35% per annum on the aggregate unused revolving commitments under the Compass Credit Agreement. We also must pay fees with respect to any letters of credit issued under the Compass Credit Agreement.
The Compass Credit Agreement contains usual and customary covenants for agreements of this type, including, but not limited to, certain financial covenants, such as a minimum fixed charge coverage ratio of 1.20 to 1.00. At March 31, 2019 and September 30, 2018, our fixed charge coverage ratio was 1.22 to 1.00 and 1.51 to 1.00, respectively. The Compass Credit Agreement also requires us

to maintain a consolidated leverage ratio not to exceed 2.00 to 1.00, subject to certain adjustments as further described in the Compass Credit Agreement. At March 31, 2019 and September 30, 2018, our consolidated leverage ratio was 0.88 to 1.00. At March 31, 2019 and September 30, 2018, we were in compliance with all covenants under the Compass Credit Agreement.
Capital RequirementsExpenditures and Sources of LiquidityWorking Capital
During the six months ended March 31, 20192020 and 2018,2019, our capital expenditures were approximately $19.8$34.5 million and $22.0$19.8 million, respectively. Our capital expenditures are typically made during the same fiscal year in which they are approved. At March 31, 2019,2020, our commitments for capital expenditures were not material to our financial condition or results of operations on a consolidated basis.   For the full fiscal year 2019,2020, we expect total capital expenditures to be approximately $39.0$40.0 million to $42.0 million.million, not including $11.5 million for the buyout of equipment leases. Our capital expenditure budget is an estimate and is subject to change. As described further below, we believe that cash flows from operations combined with existing cash on hand and amounts available under our credit facilities will be sufficient to fund our working capital needs and planned capital expenditures for at least the next twelve12 months.
Historically, we have had significant cash requirements in order to organically expand our business into new geographic markets. Our cash requirements include costs related to increased capital expenditures, purchase andof materials, production of materials and our organic expansion into new markets. Our working capital needs are driven by the seasonality and growth of our business, with our cash requirements increasing in periods of growth. Additional cash requirements resulting from our growth include the costs of additional personnel, production and distribution facilities, enhancements to our information systems, integration of acquisitions andexpenditures related to our compliance with laws and rules applicable to public companies.companies and our integration of any acquired businesses.
We have historically relied onupon cash available through credit facilities, in addition to cash on hand and from operations, to finance our working capital requirements and to support our growth. We regularly monitor potential capital sources, including the equity and debt financings,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.
We believe that our cash on hand, operating cash flow and available borrowings under the Compass RevolvingBBVA Credit FacilityAgreement will be sufficient to fund our operations for at least the next twelve12 months. However, future cash flows are subject to a number of variables, including the potential impacts of COVID-19, 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 cash in sufficient amounts to maintain planned or future levels of capital expenditures. In the event that we make one or more acquisitions and the amount of capital required is greater than the amount of cash on hand we have available for acquisitions at that time, we could be required to reduce the expected level of capital expenditures and/or seek additional capital. If we seek additional capital, we may do so through borrowings under the Compass RevolvingBBVA Credit Facility,Agreement, joint ventures, asset sales, offerings of debt or equity securities or other means. However, the unprecedented public health and governmental efforts to contain the spread of COVID-19 have created significant uncertainty as to general economic conditions for the remainder of 2020 and beyond, and our ability to engage in any such transactions may be constrained by economic conditions and other factors outside of our control. We cannot guarantee that this additional capital will 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.
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Commodity Price Risk
We are subject to commodity price risk with respect to price changes in liquid asphalt and energy, resources, including (i) fossil fuels and electricity for aggregates and asphalt paving mix production, (ii) natural gas for HMA production and (iii) diesel fuel for distribution vehicles and production-related mobile equipment. 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. In addition, we may enter into various firm purchase commitments, for certain raw materials with terms generally less than one year.year, for certain raw materials.
We have entered into fuel swap contracts to mitigate the financial impact of fluctuations in fuel prices. As of March 31, 2020, we had fuel swap contracts to pay fixed prices for fuel with an aggregate notional amount of 3.9 million gallons, maturing through 2021. The fair value of these derivative contracts was $(0.8) million at March 31, 2020. These fuel swap contracts provide a fixed price for less than 50% of our estimated fuel usage for the remainder of fiscal years 2020 through 2022.
Interest Rate Risk
We are exposed to interest rate risk on certain of our short-term and long-term debt obligations used to finance our operations and acquisitions. We have LIBOR-based floating rate borrowings under the CompassBBVA Credit Agreement, 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 hedgesto hedge against the impact of interest rate changes on future earnings and cash flows. In order to hedge against changes in interest rates and to manage fluctuations in cash flows resulting from interest rate risk, on June 30, 2017, we entered into an amortizing interest rate swap agreement applicable to $25.0 million of outstanding debt under the Compass Term Loan, for which we pay a fixed rate of 2.015% and receive a credit based on the applicable LIBOR rate. In connection with the amendment to the BBVA Credit Agreement and the additional borrowing on May 15, 2018, related to the Scruggs Acquisition, we entered into an additional $11.0 million notional interest rate swap agreement applicable to the $22.0 million of additional debt that we incurred under the Compass Term Loan. Under this additional swap agreement, we pay a fixed percentage rate of 3.01% and receive a credit based on the applicable LIBOR rate. In connection with the amendment to the BBVA Credit Agreement and the additional borrowing on October 1, 2019, we entered into an additional $5.9 million notional interest rate swap agreement applicable to the $10.0 million of additional debt under the Term Loan. Under this additional swap agreement, we pay a fixed percentage rate of 1.58% and receive a credit based on the applicable LIBOR rate. On February 27, 2020, the Company entered into an additional $26.3 million notional interest rate swap agreement applicable to the Term Loan on that date, under which we pay a fixed percentage rate of 1.24% and receive a credit based on the applicable LIBOR rate.

At March 31, 2019,2020, we had a total of $55.1$15.0 million of non-hedged variable rate borrowings outstanding. Holding other factors constant and absent the interest rate swap agreement described above, a hypothetical 1% change in our borrowing rates would result in a $0.6 million change in our annual interest expense based on our variable rate debt at March 31, 2019 and September 30, 2018.
Off-Balance Sheet Arrangements
The Company entersAs of March 31, 2020, we have no material off balance sheet arrangements, except for purchase commitments for diesel fuel entered into operating leases for property and equipment in the normal course of business. See Note 19 - Commitments and Contingencies to our consolidated financial statements included in the 2018 Form 10-K for additional information. Other than the operating leases described therein, we do not currently have any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future effect on our financial condition, revenue or expenses, results of operations, liquidity, capital expenditures or capital resources that would be material to investors.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.
We are a smaller reporting company, as defined by Rule 12b-2 of the Exchange Act, and therefore are not required to provide the information called for by this Item.

Item 4. Controls and Procedures.
Evaluation of Disclosure ControlsControl and Procedures
We maintain disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed inOur management carried out, as of March 31, 2020, with the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated toparticipation of our management, including our President and Chief Executive Officer and our Chief Financial Officer, to allow timely decisions regarding required disclosure. There are inherent limitations to the effectivenessan evaluation of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable, not absolute, assurance of achieving their control objectives.
Our management, under the supervision of our President and Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Quarterly ReportAct. Based on Form 10-Q. As a result of the material weaknesses inthat evaluation, our internal control over financial reporting described below, our President and Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of the period covered by this Quarterly Report on Form 10-Q,March 31, 2020, our disclosure controls and procedures were not effective at theto provide reasonable assurance level.that material information required to be disclosed by us in reports we file under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms and that information required to be disclosed by us in the reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
Changes
Changes in Internal Control Over Financial Reporting
In the course of preparing our consolidated financial statements for the fiscal years ended September 30, 2018 and 2017, our management determined that we have material weaknesses in our internal control over financial reporting relating to the design and operation of our information technology general controls and overall closing and financial reporting controls, including our accounting for significant and unusual transactions. We have concluded that these material weaknesses in our internal control over financial reporting are primarily due to the fact that we have historically operated as a private company with limited resources and had neither formally designed and implemented the necessary business processes and related internal controls nor employed personnel with the appropriate level of experience and technical expertise to oversee (i) our business processes and controls surrounding information technology general controls, (ii) our closing and financial reporting processes, or (iii) the accounting and financial reporting requirements related to significant and unusual transactions.
As a result of these material weaknesses, we have implemented and continue to implement remediation measures including, but not limited to, hiring additional accounting staff members and engaging a third party to assist us with our efforts to: (i) improve the effectiveness of our financial period close and reporting processes; (ii) comply with the accounting and financial reporting requirements related to significant and unusual transactions; (iii) identify and implement the business processes and controls surrounding information technology general controls; and (iv) formalize our business processes, accounting policies and internal control documentation, strengthen supervisory reviews by our management, and evaluate the effectiveness of our internal controls in accordance with the framework established by Internal Control - Integrated Framework(2013) published by the Committee of Sponsoring Organizations of the Treadway Commission.
Other than the changes intended to remediate the material weaknesses noted above, thereThere were no changes into our internal control over financial reporting during the fiscal quarter ended March 31, 20192020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II - Other Information
Item 1. Legal Proceedings.
Due to the nature of our business, we are involved in routine litigation or subject to other disputes or claims related to our business activities, including, among other things, (i) workers'workers’ compensation claims, (ii) employment-related disputes and (iii) liability issues or breach of contract or tortious conduct claims in connection with the performance of services and provision of materials. We and our affiliates are also subject to government inquiries in the ordinary course of business seeking information concerning our compliance with government construction contracting requirements and various laws and regulations, the outcome of which cannot be predicted with certainty. In the opinion of our management, after consultation with legal counsel, none of the pending inquiries, litigation, disputes or claims against us, if decided adversely to us, would have a material adverse effect on our financial condition, cash flows or results of operations. There have been no material changes to the legal proceedings disclosed in the 2019 Form 10-K.

Item 1A. Risk Factors.
In addition to the other financial information set forth in this report, you should carefully consider the factors discussed below and in Part I, Item 1A, "Risk“Risk Factors,"” in our 2018the 2019 Form 10-K that could materially affect our business, financial condition or future operating results. The risks described below and in our 2018the 2019 Form 10-K are not the only risks that we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and operating results.

Our business could be materially and adversely affected by a widespread outbreak of a contagious disease or other similar adverse public health development, or fear of such an event, and the measures that federal, state and local governments, agencies, law enforcement and/or health authorities implement to address it.

Our business could be adversely impacted by the effects of a widespread outbreak of a contagious disease, including the COVID-19 pandemic or a similar adverse public health development, as well as actions taken by federal, state and local governments, agencies, law enforcement and health authorities to contain the outbreak. Such an event in our markets could, among other things, result in employee absences or require us to temporarily close our facilities or project sites, which, in turn, could significantly and adversely affect our productivity and our ability to complete projects in accordance with our contractual obligations. In addition, a disruption in the supply chain for raw materials or equipment, whether as a result of facility closures or otherwise, could increase our labor and materials costs and impair our ability to manufacture hot-mix asphalt. Moreover, our customers – both public and private – who are adversely impacted could cancel or delay current or prospective projects and could become delinquent in their payments to us for work that we have performed.

Our business could also be negatively impacted over the medium-to-longer term if the disruptions related to the COVID-19 pandemic decrease consumer confidence generally or significantly prolong the current economic downturn, which could lead to a decline in public and private development projects and thereby reduce demand for our services. Relatedly, an economic slowdown caused by the outbreak of an infectious disease or other similar adverse public health development could cause the tax revenues received by federal, state and local government agencies to decline and thereby decrease the funding available for public projects. Such developments could impair our ability to undertake construction projects in a typical manner or at all, generate revenues and cash flows, and/or access the capital or lending markets (or significantly increase the costs of doing so); increase the costs or decrease the supply of raw materials or equipment or the availability of subcontractors and other talent, including as a result of infections or quarantining; and/or result in the diversion of public funds that otherwise would be available for infrastructure projects to support public health efforts. The inherent uncertainty surrounding COVID-19, due in part to rapidly changing governmental directives, public health challenges and progress, and market reactions thereto, also makes it more challenging for our management to estimate the future performance of our business for the remainder of the 2020 fiscal year and beyond.

While it is difficult to estimate the impact that an outbreak of an infectious disease, including the COVID-19 pandemic, could have on our operations, the measures taken by local, state, and federal governments, actions that we take to protect our employees, and the impact on various business activities in affected markets could adversely affect our financial condition, results of operations and cash flows.

The previously announced phase-out of LIBOR, or the replacement of LIBOR with a different reference rate, may adversely affect the interest rate that we pay on our indebtedness.

The interest rate that we pay on borrowings under the BBVA Credit Agreement is calculated based on a rate spread over LIBOR. In 2017, the United Kingdom’s Financial Conduct Authority, which regulates LIBOR, announced that it would phase out LIBOR by the end of 2021. It is unclear whether new methods of calculating LIBOR will be established such that it continues to exist after 2021, or whether alternative rates or benchmarks will be adopted. Changes in the method of calculating LIBOR, or the replacement of LIBOR with an alternative rate or benchmark, may adversely affect interest rates, including the rates we pay on borrowings under the BBVA
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Credit Agreement, and result in higher borrowing costs. This could materially and adversely affect our results of operations, cash flows and liquidity. We may need to renegotiate our loan facilities and changes in the method of calculating LIBOR, or the use of an alternative rate or benchmark, may negatively impact the terms of such indebtedness.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Unregistered Sales of Equity Securities
The Company did not sell any of its equity securities during the period covered by this report that were not registered under the Securities Act.
Use of Proceeds from Initial Public Offering of Class A Common Stock
On May 3, 2018, the Company’s Registration Statement on Form S-1 (File No. 333-224174) (the "Form S-1") filed in connection with the IPO of the Company's Class A common stock was declared effective by the SEC. There has been no material change in the Company's planned use of the proceeds received from the sale of shares of Class A common stock in the IPO from that described in the prospectus forming part of the Form S-1 and other periodic reports that the Company has filed with the SEC.
Issuer Purchases of Equity Securities
During the quarter covered by this report, the Company did not purchase any of its equity securities that are registered under Section 12(b) of the Exchange Act.

Item 3. Defaults Upon Senior Securities.
None.

Item 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 Quarterly Report on Form 10-Q.

Item 5. Other Information.
None.

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Item 6. Exhibits.
Exhibit
Number
Description
3.1
Amended and Restated Certificate of Incorporation of Construction Partners, Inc. (incorporated by reference to Exhibit 3.1 to Amendment No. 2 to the Registration Statement on Form S-1 (File No. 333-224174) filed on April 27, 2018)
3.2
Amended and Restated Bylaws of Construction Partners, Inc. (incorporated by reference to Exhibit 3.2 to Amendment No. 2 to the Registration Statement on Form S-1 (File No. 333-224174) filed on April 27, 2018)
4.1
Form of Class A Common Stock Certificate (incorporated by reference to Exhibit 4.1 to Amendment No. 1 to the Registration Statement on Form S-1 (File No. 333-224174) filed on April 23, 2018)
4.2
Registration Rights Agreement, dated June 8, 2007, by and among Construction Partners, Inc. (f/k/a SunTx CPI Growth Company, Inc.) and certain security holders party thereto (incorporated by reference to Exhibit 4.2 to the Registration Statement on Form S-1 (File No. 333-224174) filed on April 6, 2018)
10.1
10.2
31.1*
Certification of President and Chief Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended
31.2*
Certification of Executive Vice President and Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended
32.1**
32.2**
Certification of Executive Vice President and Chief Financial Officer pursuant to 18 U.S.C. Section 1350
95.1*
Mine Safety DisclosureDisclosures
101*101.INS*Inline XBRL Instance Document
101.SCH*Inline XBRL Taxonomy Extension Schema Document
101.CAL*Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE*Inline XBRL Taxonomy Extension Presentation Linkbase Document
104*Cover Page Interactive Data FilesFile (formatted as Inline XBRL and contained in Exhibit 101)
*Filed herewith.
**Furnished herewith.


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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on this 14th8th day of May, 2019.
2020.
CONSTRUCTION PARTNERS, INC.
By:CONSTRUCTION PARTNERS, INC.
By:/s/ Charles E. Owens
Charles E. Owens
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Name and SignatureTitleDate
/s/ Charles E. OwensPresident, Chief Executive Officer and DirectorMay 8, 2020
Charles E. Owens(Principal Executive Officer)
Name and SignatureTitleDate
/s/ Charles E. OwensPresident, Chief Executive Officer and DirectorMay 14, 2019
Charles E. Owens(Principal Executive Officer)
/s/ R. Alan PalmerExecutive Vice President and Chief Financial OfficerMay 14, 20198, 2020
R. Alan Palmer(Principal Financial Officer)



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