Document


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of report (Date of earliest event reported): August 8, 2019 
CONSTRUCTION PARTNERS, INC.
(Exact name of registrant as specified in its charter) 
 
Delaware
 
001-38479
 
26-0758017
(State or other jurisdiction
of incorporation)
 
(Commission
File Number)
 
(I.R.S. Employer
Identification Number)
 
290 Healthwest Drive, Suite 2
Dothan, Alabama 36303
(Address of principal executive offices, including zip code)
 
(334) 673-9763
(Registrant’s telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
 
o
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
Securities registered pursuant to Section 12(b) of the Act:

Title of each class
 
Trading symbol(s)
 
Name of each exchange
on which registered
Class A common stock, $0.001 par value
 
ROAD
 
The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).        Emerging growth company x

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






Item 2.02. Results of Operations and Financial Condition.

On August 8, 2019, Construction Partners, Inc. (the “Company”) issued a press release announcing its financial results for the fiscal quarter ended June 30, 2019. A copy of the press release is furnished as Exhibit 99.1 hereto, and the information contained in Exhibit 99.1 is incorporated herein by reference.

The information furnished pursuant to this Item 2.02, including Exhibit 99.1, shall not be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and will not be incorporated by reference into any registration statement filed under the Securities Act of 1933, as amended, unless specifically identified therein as being incorporated therein by reference.

Item 9.01.     Financial Statements and Exhibits.

(d) Exhibits

Exhibit No.
Description
    






SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 
CONSTRUCTION PARTNERS, INC.
 
 
Date: August 8, 2019
By:
/s/ Charles E. Owens
 
 
Charles E. Owens
 
 
President and Chief Executive Officer




Exhibit


Exhibit 99.1
http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=13051509&doc=3
NEWS RELEASE

Construction Partners, Inc. Announces Fiscal 2019 Third Quarter Results
Company Maintains Fiscal Year 2019 Outlook

DOTHAN, AL, August 8, 2019 - Construction Partners, Inc. (NASDAQ: ROAD) (the “Company”), a vertically integrated civil infrastructure company specializing in the construction and maintenance of roadways across five southeastern states, today reported financial and operating results for its third fiscal quarter ended June 30, 2019.

Key Metrics: Fiscal 2019 Third Quarter Compared to Fiscal 2018 Third Quarter

Revenue was $227.3 million, up 16.5%

Gross profit was $38.1 million, up 29.3%

Net income was $17.2 million, up 28.3%

Adjusted EBITDA (1) was $31.3 million, up 37.9%

Charles E. Owens, the Company’s President and Chief Executive Officer, stated, “Third quarter growth was fueled by strong operational performance and effective project execution by our workforce throughout our markets. Consistent with our historical experience, we were able to efficiently utilize our hot mix asphalt plants and equipment during the third quarter due to favorable working conditions, which contributed to higher profitability in the quarter.”

“Project backlog at June 30, 2019 was $581.1 million. We are pleased with our backlog at quarter-end and with the opportunities available for bid in the remainder of our fiscal year and beyond,” continued Owens. “Accordingly, we are maintaining our outlook for fiscal year 2019 with regard to revenue, net income and Adjusted EBITDA.”

Ned N. Fleming, III, the Company’s Executive Chairman, stated, “Our proven strategy of sustainable growth continues as our team executes on this strategy. We are pleased with the continued opportunities for growth in our markets and the positive trends that we believe will drive future growth and enhance shareholder value.”

Conference Call

The Company will conduct a conference call on Friday, August 9, 2019 at 10:00 a.m. Central Time to discuss financial and operating results for the fiscal third quarter ended June 30, 2019. To access the call live by phone, dial (412) 902-0003 and ask for the Construction Partners call at least 10 minutes prior to the start time. A telephonic replay will be available through August 16, 2019 by calling (201) 612-7415 and using passcode 13691702#. A webcast of the call will also be available live and for later replay on the Company’s Investor Relations website at www.constructionpartners.net.

About Construction Partners, Inc.

Construction Partners, Inc. is a vertically integrated civil infrastructure company operating across five southeastern states, with 32 hot mix asphalt plants, nine aggregate facilities and one liquid asphalt terminal. Publicly funded projects make up the majority of its business and include local and state roadways, interstate highways, airport runways and bridges. The majority of the Company’s public projects are maintenance-related. Private sector projects include paving and sitework for office and industrial parks, shopping centers, local businesses and residential developments. To learn more, visit www.constructionpartners.net.


(1) Adjusted EBITDA is a financial measure not presented in accordance with generally accepted accounting principles (“GAAP”). Please see “Reconciliation of Non-GAAP Financial Measures” at the end of this press release.






Cautionary Note Regarding Forward-Looking Statements

Certain statements contained herein that are not statements of historical or current fact constitute “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934. These statements may be identified by the use of words such as “may,” “will,” “expect,” “should,” “anticipate,” “intend,” “project,” “outlook,” “believe” and “plan.” The forward-looking statements contained in this press release include, without limitation, statements related to financial projections, future events, business strategy, future performance, future operations, backlog, financial position, estimated revenues and losses, projected costs, prospects, plans and objectives of management. These and other forward-looking statements are based on management’s current views and assumptions and involve risks and uncertainties that could significantly affect expected results. Important factors could cause actual results to differ materially from those expressed in the forward-looking statements, including, among others: our ability to successfully manage and integrate acquisitions; failure to realize the expected economic benefits of acquisitions, including future levels of revenues being lower than expected and costs being higher than expected; failure or inability to implement growth strategies in a timely manner; 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 requirements and initiatives, including those related to funding for public or infrastructure construction, land usage and environmental, health and safety matters; unfavorable economic conditions and restrictive financing markets; 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 and other claims and insurance coverage issues; risks related to our information technology systems and infrastructure; our ability to remediate material weaknesses in internal control over financial reporting identified in preparing our financial statements and to subsequently maintain effective internal control over financial reporting; and the risks, uncertainties and factors set forth under “Risk Factors” in the Company’s most recent Annual Report on Form 10-K. Forward-looking statements speak only as of the date they are made. The Company assumes no obligation to update forward-looking statements to reflect actual results, subsequent events, or circumstances or other changes affecting such statements except to the extent required by applicable law.

Contacts:

Rick Black / Ken Dennard
Dennard Lascar Investor Relations
ROAD@DennardLascar.com
(713) 529-6600

- Financial Statements Follow -






Construction Partners, Inc.
Consolidated Statements of Income
(unaudited, in thousands, except share and per share data)

 
For the Three Months Ended June 30,
For the Nine Months Ended June 30,
 
 2019
2018
 2019
2018
Revenues
$
227,290

$
195,075

$
545,921

$
464,395

Cost of revenues
     189,198

     165,606

     466,900

     398,379

Gross profit
       38,092

       29,469

       79,021

       66,016

General and administrative expenses
     (15,968)

     (14,788)

     (45,170)

     (40,572)

Settlement income
-

-

-

       14,803

Gain on sale of equipment, net
               58

               86

          1,085

         1,117

Operating income
       22,182

       14,767

       34,936

       41,364

Interest expense, net
          (615)

          (406)

       (1,509)

          (956)

Other income (expense), net
             190

               15

             296

            (45)

Income before provision for income taxes and earnings from investment in joint venture
       21,757

       14,376

       33,723

       40,363

Provision for income taxes
         4,941

         1,409

         8,080

         5,382

Earnings from investment in joint venture
            386

            436

            925

            666

Net income
$
17,202

$
13,403

$
26,568

$
35,647

 
 

 

 

 

Net income per share attributable to common stockholders:
 

 

 

 

Basic
$
0.33

$
0.29

$
0.52

$
0.82

Diluted
$
0.33

$
0.29

$
0.52

$
0.81

 
 

 

 

 

Weighted average number of common shares outstanding:
 

 

 

 

Basic
51,414,619

46,557,785

51,414,619

43,648,309

Diluted
51,422,899

46,988,359

51,414,887

43,932,546







Construction Partners, Inc.
Consolidated Balance Sheets
(in thousands, except share and per share data)

 
 
June 30,
September 30,
 
 
 2019
2018
ASSETS
 
(unaudited)
 
Current assets:
 
 
 
Cash and cash equivalents
 
$
59,648

$
99,137

Contracts receivable including retainage, net
 
       134,709

       120,291

Costs and estimated earnings in excess of billings on uncompleted contracts
 
         14,043

           9,334

Inventories
 
         37,069

         24,556

Prepaid expenses and other current assets
 
         13,533

         14,137

Total current assets
 
      259,002

       267,455

 
 
 

 

Property, plant and equipment, net
 
       201,712

       178,692

Goodwill
 
         36,968

         32,919

Intangible assets, net
 
           3,091

           3,735

Investment in joint venture
 
              384

           1,659

Other assets
 
           6,292

         10,270

Deferred income taxes, net
 
           1,575

           1,580

Total assets
 
$
509,024

$
496,310

 
 
 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 

 

Current liabilities:
 
 

 

Accounts payable
 
$
65,232

$
63,510

Billings in excess of costs and estimated earnings on uncompleted contracts
 
         32,344

         38,738

Current maturities of debt
 
         14,771

         14,773

Accrued expenses and other current liabilities
 
         19,028

         17,520

Total current liabilities
 
       131,375

       134,541

Long-term liabilities:
 
 

 

Long-term debt, net of current maturities
 
         37,096

         48,115

Deferred income taxes, net
 
           8,749

           8,890

Other long-term liabilities
 
           5,621

           5,295

Total long-term liabilities
 
         51,466

         62,300

 
 
 

 

Total liabilities
 
       182,841

       196,841

Commitments and contingencies
 
 

 

Stockholders’ equity:
 
 

 

Preferred stock, par value $0.001; 10,000,000 shares authorized and no shares issued and outstanding at June 30, 2019 and September 30, 2018
 
-

-

Class A common stock, par value $0.001; 400,000,000 shares authorized, 32,442,545 issued and outstanding at June 30, 2019, and 11,950,000 issued and outstanding at September 30, 2018
 
                32

                12

Class B common stock, par value $0.001; 100,000,000 shares authorized, 22,162,369 issued and 19,239,417 outstanding at June 30, 2019, and 42,387,571 issued and 39,464,619 outstanding at September 30, 2018
 
                22

                42

Additional paid-in capital
 
       242,639

       242,493

Treasury stock, at cost, 2,922,952 shares of Class B common stock, par value $0.001
 
       (15,603)

       (15,603)

Retained earnings
 
         99,093

         72,525

Total stockholders’ equity
 
       326,183

       299,469

Total liabilities and stockholders’ equity
 
$
509,024

$
496,310






Construction Partners, Inc.
Consolidated Statements of Cash Flows
(unaudited, in thousands)

 
 
For the Nine Months Ended June 30,
 
 
 2019
2018
Cash flows from operating activities:
 
 
 
Net income
 
$
26,568

$
35,647

Adjustments to reconcile net income to net cash provided by operating activities:
 
 

 

Depreciation, depletion and amortization of long-lived assets
 
            22,698

           17,929

Amortization of deferred debt issuance costs and debt discount
 
                    83

                   60

Provision for bad debt
 
                  421

                 435

Gain on sale of equipment, net
 
            (1,085)

            (1,117)

Equity-based compensation expense
 
                  146

                 975

Earnings from investment in joint venture
 
               (925)

               (666)

Deferred income taxes
 
               (136)

            (1,430)

Changes in operating assets and liabilities:
 
 

 

Contracts receivable including retainage, net
 
         (14,839)

           14,055

Costs and estimated earnings in excess of billings on uncompleted contracts
 
           (4,709)

           (6,128)

Inventories
 
         (11,992)

           (3,335)

Other current assets
 
                604

           (9,165)

Other assets
 
             3,978

         (12,079)

Accounts payable
 
             1,722

           (7,944)

Billings in excess of costs and estimated earnings on uncompleted contracts
 
           (6,394)

             2,823

Accrued expenses and other current liabilities
 
             1,497

           (6,048)

Other long-term liabilities
 
                326

              (352)

Net cash provided by operating activities, net of acquisition
 
           17,963

          23,660

Cash flows from investing activities:
 
 

 

Purchases of property, plant and equipment
 
        (31,744)

        (33,460)

Proceeds from sale of equipment
 
            2,898

            2,889

Business acquisition, net of cash acquired
 
          (8,854)

        (51,319)

Acquisition of liquid asphalt terminal assets
 
       (10,848)

-

Investment in joint venture
 
-

             (400)

Distributions from investment in joint venture
 
           2,200

-

Net cash used in investing activities
 
       (46,348)

        (82,290)

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 discount
 
-

         21,917

Repayments of long-term debt
 
       (11,104)

         (8,665)

Proceeds from initial public offering of Class A common stock, net of offering costs
 
-

         98,009

Proceeds from reissuance of treasury stock
 
-

                   5

Net cash (used in) provided by financing activities
 
       (11,104)

       106,266

Net change in cash and cash equivalents
 
       (39,489)

         47,636

Cash and cash equivalents:
 
 

 

Beginning of period
 
         99,137

         27,547

End of period
 
$
59,648

$
75,183

 
 
 

 

Supplemental cash flow information:
 
 

 

Cash paid for interest
 
$
1,998

$
1,578

Cash paid for income taxes
 
$
3,232

$
12,557

Non-cash items:
 
 

 

Property, plant and equipment financed with accounts payable
 
$
332

$
152






Reconciliation of Non-GAAP Financial Measures

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 and (v) certain management fees and expenses, and excludes income recognized in connection with a legal settlement between certain of the Company’s subsidiaries and a third party that did not directly relate to the Company’s business and that has not, and is not expected to, recur. Adjusted EBITDA Margin represents Adjusted EBITDA as a percentage of revenues for each period. Adjusted EBITDA and Adjusted EBITDA Margin are supplemental measures of our operating performance that are neither required by, nor presented in accordance with, GAAP. These measures should not be considered as an alternative to net income or any other performance measure derived in accordance with GAAP as an indicator of our operating performance. Management uses Adjusted EBITDA and Adjusted EBITDA Margin as key performance indicators, and we believe they are measures frequently used by securities analysts, investors and other parties 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 may include differences in capital structures, tax positions and the age and book depreciation of intangible and tangible assets.

The following tables present a reconciliation of net income, the most directly comparable measure calculated in accordance with GAAP, to Adjusted EBITDA, and the calculation of Adjusted EBITDA Margin for each of the periods presented:
Construction Partners, Inc.
Net Income to Adjusted EBITDA Reconciliation
Fiscal Quarters Ended June 30, 2019 and 2018
(unaudited, in thousands, except percentages)
 
 
For the Three Months Ended
 
 
June 30,
 
 
2019
 
2018
Net income
 
$
17,202

 
$
13,403

Interest expense, net
 
615

 
406

Provision for income taxes
 
4,941

 
1,409

Depreciation, depletion and amortization of long-lived assets
 
8,059

 
6,621

Equity-based compensation expense
 
146

 
371

Management fees and expenses (1)
 
316

 
468

Adjusted EBITDA
 
$
31,279

 
$
22,678

Revenues
 
$
227,290

 
$
195,075

Adjusted EBITDA Margin
 
13.8%

 
11.6%


(1) Reflects fees and reimbursement of certain out-of-pocket expenses under a management services agreement with an affiliate of SunTx Capital Partners, the Company’s controlling stockholder.