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

Quarterly report pursuant to Section 13 or 15(d)

Investment in Derivative Instruments

Investment in Derivative Instruments

9 Months Ended

Jun. 30, 2021

Derivative Instruments and Hedging Activities Disclosure [Abstract]

The Company’s operations expose it to a variety of market risks, including the effects of changes in commodity prices and changes in interest rates. As part of its risk management process, the Company began entering into commodity swap transactions through regulated commodity exchanges in February 2020. 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. At June 30, 2021, the aggregate notional value of these interest rate swap agreements was $40.3 million.

The following tables represent the approximate amount of realized and unrealized gains (losses) recognized in earnings on commodity derivative contracts and interest rate swap agreements for the three and nine months ended June 30, 2021 and 2020 and the fair value of these derivatives as of June 30, 2021 and September 30, 2020 (in thousands):


	For the Three Months Ended June 30, 2021 (unaudited)						For the Nine Months Ended June 30, 2021 (unaudited)
	Change in						Change in
Income Statement Classification	Realized Gain (Loss)		Unrealized Gain (Loss)		Total Gain (Loss)		Realized Gain (Loss)		Unrealized Gain (Loss)		Total Gain (Loss)
Cost of revenues	$	302	$	632	$	934	$	257	$	2,390	$	2,647
Interest expense, net	(163)		132		(31)		(511)		751		240
Total	$	139	$	764	$	903	$	(254)	$	3,141	$	2,887


	For the Three Months Ended June 30, 2020 (unaudited)						For the Nine Months Ended June 30, 2020 (unaudited)
	Change in						Change in
Income Statement Classification	Realized Gain (Loss)		Unrealized Gain (Loss)		Total Gain (Loss)		Realized Gain (Loss)		Unrealized Gain (Loss)		Total Gain (Loss)
Cost of revenues	$	(269)	$	394	$	125	$	(290)	$	(403)	$	(693)
Interest expense, net	(217)		(120)		(337)		(266)		(1,586)		(1,852)
Total	$	(486)	$	274	$	(212)	$	(556)	$	(1,989)	$	(2,545)


	June 30, 2021		September 30, 2020
Balance Sheet Classification	(unaudited)


Prepaid expenses and other current assets	$	1,203	$	—
Other assets	684		—
Accrued expense and other current liabilities - commodity swaps	—		(183)
Other long-term liabilities - commodity swaps	—		(320)
Other long-term liabilities - interest rate swaps	(957)		(1,708)
Net unrealized gain (loss) position	$	930	$	(2,211)