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3/25/22, 9:42 AM road -20210930
<br />Table of Contents
<br />NOTES TO CONSOLIDATED FINANCIAL STATENIENTS
<br />Note 1- General
<br />Business Description
<br />Construction Partners, Inc. (the "Company") is a civil infrastructure company that specializes in the construction and maintenance of
<br />roadways across Alabama, Florida, Georgia, North Carolina and South Carolina. Through its wholly owned subsidiaries, the Company
<br />provides a variety of products and services to both public and private infrastructure projects, with an emphasis on highways, roads,
<br />bridges, airports, and commercial and residential developments. The Company's primary operations consist of (i) manufacturing and
<br />distributing hot mix asphalt ("HMA") for both internal use and sales to third parties in connection with construction projects, (ii)
<br />paving activities, including the construction of roadway base layers and application of asphalt pavement, (iii) site development,
<br />including the installation of utility and drainage systems, (iv) mining aggregates, such as sand, gravel and construction stone, that are
<br />used as raw materials in the production of HMA and for sales to third parties, and (v) distributing liquid asphalt cement for both
<br />internal use and sales to third parties in connection with HMA production.
<br />The Company was formed as a Delaware corporation in 2007 as a holding company to facilitate an acquisition growth strategy in the
<br />HMA paving and construction industry. SunTx Capital Partners ("SunTx"), a private equity firm based in Dallas, Texas, is the
<br />Company's majority investor and has owned a controlling interest in the Company's stock since the Company's inception.
<br />Management's Estimates
<br />The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United
<br />States of America ("GAAP") requires management to make estimates and assumptions that affect the recorded amounts of assets,
<br />liabilities, stockholders' equity, revenues and expenses during the reporting period, and the disclosure of contingent liabilities at the
<br />date of the consolidated financial statements. Estimates are used in accounting for items such as recognition of revenues and cost of
<br />revenues, mineral reserves, goodwill and other intangible assets, business acquisition accounting estimates, valuation of operating lease
<br />right -of -use assets, allowance for doubtful accounts, valuation allowances related to income taxes, accruals for potential liabilities
<br />related to lawsuits or insurance claims, asset retirement obligations, the fair value of derivative instruments, the fair value of equity -
<br />based compensation awards and the economic implications of the COVID-19 pandemic. Estimates are continually evaluated based on
<br />historical information and actual experience; however, actual results could differ from these estimates.
<br />Note 2 - Significant Accounting Policies
<br />Basis of Presentation
<br />The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All inter -company
<br />balances and transactions have been eliminated in consolidation.
<br />Cash and Cash Equivalents
<br />Cash consists principally of currency on hand and demand deposits at commercial banks. Cash equivalents are short-term, highly liquid
<br />investments that are both readily convertible to known amounts of cash and are so near their maturity that they present insignificant
<br />risk of changes in value because of changes in interest rates. Cash equivalents include investments with original maturities of three
<br />months or less. The Company maintains demand accounts, money market accounts and certificates of deposit at several banks. From
<br />time to time, account balances have exceeded the maximum available federal deposit insurance coverage limit. The Company has not
<br />experienced any losses in such accounts and regularly monitors its credit risk.
<br />Contracts Receivable Including Retainage, Net
<br />Contracts receivable are generally based on amounts billed and currently due from customers, amounts currently due but unbilled, and
<br />amounts retained by customers pending completion of a protect. It is common in the Company's industry for a small portion of either
<br />progress billings or the contract price, typically 10%, to be withheld by the customer until the Company completes a project to the
<br />satisfaction of the customer in accordance with the applicable contract terms. Such amounts, defined as retainage, represent a contract
<br />asset and are included on the Consolidated Balance Sheets as "Contracts receivable including retainage, net." Based on the Company's
<br />experience with similar contracts in recent years, billings for such retainage balances are generally collected within one year of the
<br />completion of the project.
<br />https://www.sec.gov/Archives/edgar/data/0001718227!000171822721000107/road-20210930.htm 84/144
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