Construction Partners, Inc. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Related Parties

Related Parties

9 Months Ended

Jun. 30, 2019

On December 31, 2017, the Company sold an indirect wholly owned subsidiary to an immediate family member of a Senior Vice President of the Company ("Purchaser of subsidiary") in consideration for an interest-bearing note receivable in the amount of $0.9 million, which approximated the net book value of the disposed entity. At June 30, 2019, $0.1 million and $0.8 million was reflected on the Company's Consolidated Balance Sheet within other current assets and other assets, respectively, representing the remaining balances on this note receivable. In connection with this transaction, the Company also received an interest-bearing note receivable from the disposed entity ("Disposed entity") on December 31, 2017 in the amount of $1.0 million representing certain accounts payable of the Disposed entity that were paid by the Company. At June 30, 2019, $0.1 million and $0.9 million was reflected on the Company's Consolidated Balance Sheet within other current assets and other assets, respectively, representing the remaining balances on this note receivable. Remaining principal and interest payments are scheduled to be made in periodic installments during fiscal year 2019 through fiscal year 2026.

From time to time, the Company conducts or has conducted business with the following related parties:

•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").

•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").

•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 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.

•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 June 1, 2014, the Company entered into an access agreement with Island Pond Corporate Services, LLC ("Island 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's Board of Directors.

•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.

The following table presents revenues earned and expenses incurred by the Company during the three and nine months ended June 30, 2019 and June 30, 2018, if and to the extent the Company engaged in transactions with the parties described above during the respective periods, and accounts receivable and accounts payable balances at June 30, 2019 and September 30, 2018, related to transactions with such parties (in thousands):


	Revenue Earned (Expense Incurred)													Accounts Receivable (Payable)
	For the Three Months Ended June 30,						For the Nine Months Ended June 30,						June 30,	September 30,
	2019		2018		2019		2018		2019		2018
	(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)
Purchaser of subsidiary	$	—	$	—	$	—	$	—	$	876	$	850
Disposed entity	$	—	$	—	$	—	$	—	$	966	$	937
Subcontracting Services ⁽¹⁾	$	(7,195)	$	(4,321)	$	(13,561)	$	(8,687)	$	(1,724)	$	(790)
Construction Services	$	1,609	$	57	$	2,783	$	1,633	$	4,350	$	2,863
Deep South Adventures, LLC ⁽²⁾	$	—	$	—	$	—	$	(33)	$	—	$	—
Vehicles⁽²⁾	$	(496)	$	(288)	$	(1,128)	$	(864)	$	—	$	—
Consulting Services ⁽²⁾	$	(64)	$	(87)	$	(198)	$	(203)	$	—	$	—
Legal Services ⁽²⁾	$	—	$	—	$	—	$	(58)	$	—	$	—
H&K⁽²⁾	$	(36)	$	(21)	$	(78)	$	(63)	$	—	$	—
H&A⁽²⁾	$	—	$	(17)	$	—	$	(51)	$	—	$	—
Island Pond ⁽²⁾	$	(80)	$	(80)	$	(240)	$	(240)	$	—	$	—
SunTx⁽²⁾	$	(316)	$	(468)	$	(957)	$	(1,119)	$	—	$	—

⁽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.