Annual report pursuant to Section 13 and 15(d)

Business Acquisitions

v3.22.2.2
Business Acquisitions
 12 Months Ended
Sep. 30, 2022
Business Combinations [Abstract]  
Business Acquisitions Business Acquisitions
Acquisitions - Final
During the fiscal year ended September 30, 2022, the Company and its subsidiaries made the following business acquisitions:
On October 1, 2021, the Company acquired all of the capital stock of King Asphalt, Inc., an HMA production and paving company headquartered in Liberty, South Carolina. The transaction established the Company's first platform company in South Carolina and added three HMA plants in the Greenville, South Carolina metro area.
On October 18, 2021, a subsidiary of the Company acquired substantially all of the assets of J. Miller Construction Inc., a grading and sitework company headquartered in Pensacola, Florida. The transaction enhanced the Company’s vertical integration of construction services and supplemented the Company’s capabilities in the Pensacola, Florida market area.
On March 18, 2022, a subsidiary of the Company acquired substantially all of the assets of GAC Contractors, Inc., an asphalt paving, grading and sitework company headquartered in Panama City, Florida. The transaction enhanced the Company's operational resources and capabilities in the Panama City, Florida market area.
These acquisitions were accounted for as business combinations in accordance with Topic 805. The Company consulted with independent third parties to assist in the valuation process. As of September 30, 2022, the Company has finalized its purchase price allocation for these acquisitions. Total consideration transferred for these three acquisitions was $92.4 million as of September 30, 2022.
Identifiable assets acquired and liabilities assumed were recorded at their estimated fair values based on the methodology described under Fair Value Measurements in Note 2 - Significant Accounting Policies. The amount of the purchase price exceeding the net fair value of identifiable assets acquired and liabilities assumed was recorded as goodwill in the aggregate amount of $37.6 million for these three acquisitions, which is deductible for income tax purposes. Goodwill primarily represents the assembled work force and synergies expected to result from the acquisition.
The results of operations attributable to these acquisitions are included in the Company’s Consolidated Statements of Comprehensive Income for the fiscal year ended September 30, 2022, from the date of acquisition forward. 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 Comprehensive Income in the amount of $0.4 million for the fiscal year ended September 30, 2022.
North Carolina Acquisition - Provisional
On March 7, 2022, a subsidiary of the Company acquired substantially all of the assets of Southern Asphalt, Inc., an asphalt paving company headquartered in Burgaw, North Carolina. The transaction provided access to the Wilmington, North Carolina metro area market. The acquisition was accounted for as a business combination in accordance with Topic 805. As of September 30, 2022, the purchase price allocation was provisional pending certain information necessary to finalize estimates of liabilities assumed. The Company consulted with independent third-parties to assist in the valuation process. The Company expects to finalize these values as soon as practicable and no later than one year from the acquisition date. Total consideration transferred for this acquisition was $11.7 million as of September 30, 2022.
Identifiable assets acquired and liabilities assumed were recorded at their estimated fair values based on the methodology described under Fair Value Measurements in Note 2 - Significant Accounting Policies. The amount of the purchase price exceeding the net fair value of identifiable assets acquired and liabilities assumed was recorded as provisional goodwill in the amount of approximately $7.4 million, of which $6.6 million is deductible for income tax purposes. Goodwill primarily represents the assembled work force and synergies expected to result from the acquisition.

The results of operations since the March 7, 2022 acquisition date attributable to this acquisition are included in the Company’s Consolidated Statements of Comprehensive Income for the fiscal year ended September 30, 2022. 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 Comprehensive Income in the amount of $0.1 million for the fiscal year ended September 30, 2022.

South Carolina Acquisition - Provisional
On August 1, 2022, a subsidiary of the Company acquired substantially all of the assets of Southern Asphalt, Inc., an asphalt paving, grading and sitework company headquartered in Conway, South Carolina. The transaction provides access to Horry County and the larger Myrtle Beach metro area market. The acquisition was accounted for as a business combination in accordance with Topic 805. As of September 30, 2022, the purchase price allocation has not yet been finalized due to the recent timing of this acquisition, as certain information is pending to finalize estimates of fair value of certain assets acquired and liabilities assumed. The Company consulted with independent third-parties to assist in the valuation process. The Company expects to finalize these values as soon as practicable and no later than one year from the acquisition date. Total consideration transferred for this acquisition was $25.6 million as of September 30, 2022.
Identifiable assets acquired and liabilities assumed were recorded at their estimated fair values based on the methodology described under Fair Value Measurements in Note 2 - Significant Accounting Policies. The amount of the purchase price exceeding the net fair value of identifiable assets acquired and liabilities assumed was recorded as provisional goodwill in the amount of approximately $0.3 million, of which $0.0 million is deductible for income tax purposes. Goodwill primarily represents the assembled work force and synergies expected to result from the acquisition.
The results of operations since the August 1, 2022 acquisition date attributable to this acquisition are included in the Company’s Consolidated Statements of Comprehensive Income for the fiscal year ended September 30, 2022. 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 Comprehensive Income in the amount of $0.3 million for the fiscal year ended September 30, 2022.
Combined Acquisitions During the Fiscal Year Ended September 30, 2022
The following table summarizes the consideration for the aforementioned acquisitions and the amounts of identified assets acquired and liabilities assumed as of September 30, 2022 (in thousands):
Acquisitions - Final North Carolina Acquisition - Provisional South Carolina Acquisition - Provisional Total
Cash and cash equivalents $ 1,168  $ —  $ —  $ 1,168 
Contracts receivable including retainage 7,162  1,854  —  9,016 
Cost and estimated earnings in excess of billings on uncompleted contracts 125  —  —  125 
Inventories 1,928  64  988  2,980 
Prepaid expenses and other current assets 213  —  —  213 
Property, plant and equipment 45,776  3,879  30,636  80,291 
Deferred tax assets 2,237  234  —  2,471 
Intangible assets 9,000  —  —  9,000 
Total assets 67,609  6,031  31,624  105,264 
Accounts payable 2,759  —  —  2,759 
Billings in excess of costs and estimated earnings on uncompleted contracts 2,697  426  —  3,123 
Accrued expenses and other current liabilities 2,526  594  2,980  6,100 
Unfavorable contract liabilities 4,900  —  3,000  7,900 
Deferred tax liabilities —  —  282  282 
Total liabilities 12,882  1,020  6,262  20,164 
Goodwill 37,647  7,369  284  45,300 
Total cash consideration transferred 92,374  11,716  25,646  129,736 
Total consideration payable —  664  —  664 
Total purchase price $ 92,374  $ 12,380  $ 25,646  $ 130,400 
The Consolidated Statements of Comprehensive Income for the fiscal year ended September 30, 2022 includes $120.8 million of revenue and $0.9 million of net income attributable to the operations of the businesses acquired during the 2022 fiscal year from their respective acquisition dates through September 30, 2022.
The following presents pro forma revenues and net income as though the acquisitions had occurred on October 1, 2019 (unaudited, in thousands):
For the Fiscal Year Ended September 30,
2022 2021 2020
Pro forma revenues $ 1,374,936  $ 1,104,850  $ 979,790 
Pro forma net income $ 19,137  $ 18,016  $ 38,136 

Pro forma financial information is presented as if the operations of the acquisitions had been included in the consolidated results of the Company since October 1, 2019, and gives effect to transactions that are directly attributable to the acquisitions, including adjustments to:
(a)Include the pro forma results of operations of the acquisitions for the fiscal years ended September 30, 2022, 2021 and 2020.
            
(b)Include additional depreciation and depletion expense related to the fair value of acquired property, plant and equipment and reserves at aggregates facilities, as applicable, as if such assets were acquired on October 1, 2019 and consistently applied to the Company’s depreciation and depletion methodologies.
(c)Include interest expense under the Term Loan as if the funds borrowed to finance the purchase price were borrowed on October 1, 2019. Interest expense calculations further assume that no principal payments were made during the period from October 1, 2019 through September 30, 2022, and that the interest rate in effect on the date the Company made the acquisitions was in effect for the period from October 1, 2019 through September 30, 2022.

(d)Exclude $0.8 million of acquisition-related expenses from the fiscal year ended September 30, 2022, as though such expenses were incurred prior to the pro forma acquisition date of October 1, 2019.

Pro forma information is presented for informational purposes and may not be indicative of revenue or net income that would have been achieved if these acquisitions had occurred on October 1, 2019.

Combined Acquisitions During the Fiscal Year Ended September 30, 2021

North Carolina Acquisitions

During the fiscal year ended September 30, 2021, a subsidiary of the Company purchased five HMA production and paving companies and a grading and sitework company on the following dates and based in the following locations: (i) on October 8, 2020, in Carthage, North Carolina, (ii) on October 30, 2020, in Ahoskie, North Carolina, (iii) on December 3, 2020, in Raleigh, North Carolina, (iv) on December 18, 2020, in Kitty Hawk, North Carolina, (v) on June 22, 2021, in Wilson, North Carolina and (vi) on September 10, 2021, in Albemarle, North Carolina. These acquisitions were accounted for as business combinations in accordance with Topic 805. Total consideration transferred for these six acquisitions was $98.7 million. The amount of the purchase price exceeding the net fair value of identifiable assets acquired and liabilities assumed was recorded as goodwill in the aggregate amount of $33.3 million for these acquisitions.

On August 2, 2021, a subsidiary of the Company acquired a crushed stone and aggregates facility located near Goldston, North Carolina. This acquisition was accounted for as a business combination in accordance with Topic 805. Total consideration transferred for this acquisition was $31.4 million. The amount of the purchase price exceeding the net fair value of identifiable assets acquired and liabilities assumed was recorded as goodwill in the aggregate amount of $2.4 million for this acquisition. The prior year provisional accounting for this acquisition was finalized as of September 30, 2022.

Alabama Acquisition

On July 30, 2021, a subsidiary of the Company acquired an HMA contracting company and related entities, all headquartered in Cullman, Alabama. This acquisition was accounted for as a business combination in accordance with Topic 805. Total consideration transferred for this acquisition was $82.1 million. The amount of the purchase price exceeding the net fair value of identifiable assets acquired and liabilities assumed was recorded as goodwill in the aggregate amount of $2.1 million for this acquisition. The prior year provisional accounting for this acquisition was finalized as of September 30, 2022.

The following table summarizes the consideration for the aforementioned acquisitions and the amounts of identified assets acquired and liabilities assumed (in thousands):
North Carolina Acquisitions Alabama Acquisition Total as of September 30, 2021 Finalized as of September 30, 2022
Accounts receivable $ 110  $ —  $ 110  $ 110 
Inventories 4,819  6,480  11,299  11,209 
Property, plant and equipment 70,613  35,020  105,633  105,847 
Mineral reserves (included in property, plant and equipment) 18,600  38,118  56,718  56,718 
Intangible assets —  75  75  3,700 
Total assets 94,142  79,693  173,835  177,584 
Total liabilities —  (718) (718) (3,210)
Goodwill 35,917  3,157  39,074  37,817 
Total purchase price $ 130,059  $ 82,132  $ 212,191  $ 212,191 

Combined Acquisitions During the Fiscal Year Ended September 30, 2020

During the fiscal year ended September 30, 2020, a subsidiary of the Company purchased an HMA production and paving company and two HMA manufacturing plants and certain related assets on the following dates and based in the following locations: (i) on October 1, 2019, in Palm City, Florida, (ii) on March 23, 2020, in Pensacola and DeFuniak Springs, Florida. These acquisitions were accounted for as business combinations in accordance with Topic 805. Total consideration transferred for these two acquisitions was $27.5 million. The amount of the purchase price exceeding the net fair value of identifiable assets acquired and liabilities assumed was recorded as goodwill in the aggregate amount of $7.8 million for these acquisitions.