FORM10-Q
| ☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||
2022
| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||
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Delaware | 45-3707650 | ||||||||||
| (State or other jurisdiction of | (I.R.S. Employer
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495 South High Street, Suite 50
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Columbus, Ohio | 43215 | ||||||||||
| (Address of principal executive offices) | (Zip Code) | ||||||||||
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||||||||
| Common Stock, | $0.01 par value per share | IBP | The New York Stock Exchange | |||||||||||
| Large accelerated filer | ☒ | Accelerated filer | ☐ | |||||||||||||||||||||
| ☐ | ||||||||||||||||||||||||
| Emerging growth company | ☐ | |||||||||||||||||||||||
253637373737373737373739
Item 1.Financial Statements
| September 30, | December 31, | |||||||
| 2017 | 2016 | |||||||
ASSETS | ||||||||
Current assets | ||||||||
Cash and cash equivalents | $ | 67,008 | $ | 14,482 | ||||
Investments | 25,114 | — | ||||||
Accounts receivable (less allowance for doubtful accounts of $4,846 and $3,397 | ||||||||
at September 30, 2017 and December 31, 2016, respectively) | 185,470 | 128,466 | ||||||
Inventories | 44,074 | 40,229 | ||||||
Other current assets | 19,599 | 9,214 | ||||||
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Total current assets | 341,265 | 192,391 | ||||||
Property and equipment, net | 78,045 | 67,788 | ||||||
Non-current assets | ||||||||
Goodwill | 153,660 | 107,086 | ||||||
Intangibles, net | 140,714 | 86,317 | ||||||
Othernon-current assets | 9,969 | 8,513 | ||||||
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Totalnon-current assets | 304,343 | 201,916 | ||||||
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Total assets | $ | 723,653 | $ | 462,095 | ||||
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LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current liabilities | ||||||||
Current maturities of long-term debt | $ | 15,550 | $ | 17,192 | ||||
Current maturities of capital lease obligations | 6,044 | 6,929 | ||||||
Accounts payable | 82,329 | 67,921 | ||||||
Accrued compensation | 25,975 | 18,212 | ||||||
Other current liabilities | 23,703 | 19,851 | ||||||
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Total current liabilities | 153,601 | 130,105 | ||||||
Long-term debt | 328,295 | 134,235 | ||||||
Capital lease obligations, less current maturities | 7,509 | 8,364 | ||||||
Deferred income taxes | 13,755 | 14,239 | ||||||
Other long-term liabilities | 23,135 | 21,175 | ||||||
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Total liabilities | 526,295 | 308,118 | ||||||
Commitments and contingencies (Note 12) | ||||||||
Stockholders’ equity | ||||||||
Preferred Stock; $0.01 par value: 5,000,000 authorized and 0 shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively | — | — | ||||||
Common Stock; $0.01 par value: 100,000,000 authorized, 32,524,934 and 32,135,176 issued and 31,862,561 and 31,484,774 shares outstanding at September 30, 2017 and December 31, 2016, respectively | 325 | 321 | ||||||
Additional paid in capital | 172,206 | 158,581 | ||||||
Retained earnings | 37,641 | 7,294 | ||||||
Treasury Stock; at cost: 662,373 and 650,402 shares at September 30, 2017 and December 31, 2016, respectively | (12,769 | ) | (12,219 | ) | ||||
Accumulated other comprehensive loss | (45 | ) | — | |||||
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Total stockholders’ equity | 197,358 | 153,977 | ||||||
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Total liabilities and stockholders’ equity | $ | 723,653 | $ | 462,095 | ||||
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| September 30, | December 31, | ||||||||||
| 2022 | 2021 | ||||||||||
| ASSETS | |||||||||||
| Current assets | |||||||||||
| Cash and cash equivalents | $ | 203,402 | $ | 333,485 | |||||||
| Investments | 24,996 | — | |||||||||
| Accounts receivable (less allowance for credit losses of $9,083 and $8,717 at September 30, 2022 and December 31, 2021, respectively) | 415,657 | 312,767 | |||||||||
| Inventories | 182,176 | 143,039 | |||||||||
| Prepaid expenses and other current assets | 71,790 | 70,025 | |||||||||
| Total current assets | 898,021 | 859,316 | |||||||||
| Property and equipment, net | 115,479 | 105,933 | |||||||||
| Operating lease right-of-use assets | 72,226 | 69,871 | |||||||||
| Goodwill | 356,612 | 322,517 | |||||||||
| Customer relationships, net | 184,225 | 178,264 | |||||||||
| Other intangibles, net | 91,613 | 86,157 | |||||||||
| Other non-current assets | 45,675 | 31,144 | |||||||||
| Total assets | $ | 1,763,851 | $ | 1,653,202 | |||||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||||||
| Current liabilities | |||||||||||
| Current maturities of long-term debt | $ | 30,494 | $ | 30,839 | |||||||
| Current maturities of operating lease obligations | 25,414 | 23,224 | |||||||||
| Current maturities of finance lease obligations | 2,275 | 1,747 | |||||||||
| Accounts payable | 156,117 | 132,705 | |||||||||
| Accrued compensation | 61,453 | 50,964 | |||||||||
| Other current liabilities | 82,809 | 68,090 | |||||||||
| Total current liabilities | 358,562 | 307,569 | |||||||||
| Long-term debt | 827,906 | 832,193 | |||||||||
| Operating lease obligations | 46,640 | 46,075 | |||||||||
| Finance lease obligations | 5,469 | 3,297 | |||||||||
| Deferred income taxes | 19,901 | 4,819 | |||||||||
| Other long-term liabilities | 47,859 | 42,409 | |||||||||
| Total liabilities | 1,306,337 | 1,236,362 | |||||||||
| Commitments and contingencies (Note 16) | |||||||||||
| Stockholders’ equity | |||||||||||
| Preferred Stock; $0.01 par value: 5,000,000 authorized and 0 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively | — | — | |||||||||
| Common stock; $0.01 par value: 100,000,000 authorized, 33,429,557 and 33,271,659 issued and 28,604,098 and 29,706,401 shares outstanding at September 30, 2022 and December 31, 2021, respectively | 334 | 333 | |||||||||
| Additional paid in capital | 225,377 | 211,430 | |||||||||
| Retained earnings | 453,286 | 352,543 | |||||||||
| Treasury stock; at cost: 4,825,459 and 3,565,258 shares at September 30, 2022 and December 31, 2021, respectively | (263,896) | (147,239) | |||||||||
| Accumulated other comprehensive income (loss) | 42,413 | (227) | |||||||||
| Total stockholders’ equity | 457,514 | 416,840 | |||||||||
| Total liabilities and stockholders’ equity | $ | 1,763,851 | $ | 1,653,202 | |||||||
INCOME (UNAUDITED)
| Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||
Net revenue | $ | 295,193 | $ | 225,392 | $ | 833,058 | $ | 629,003 | ||||||||
Cost of sales | 209,612 | 158,132 | 590,377 | 444,909 | ||||||||||||
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Gross profit | 85,581 | 67,260 | 242,681 | 184,094 | ||||||||||||
Operating expenses | ||||||||||||||||
Selling | 14,865 | 13,028 | 42,541 | 36,239 | ||||||||||||
Administrative | 41,657 | 31,504 | 122,679 | 92,677 | ||||||||||||
Amortization | 6,824 | 2,889 | 19,790 | 8,178 | ||||||||||||
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Operating income | 22,235 | 19,839 | 57,671 | 47,000 | ||||||||||||
Other expense | ||||||||||||||||
Interest expense | 4,421 | 1,544 | 11,456 | 4,605 | ||||||||||||
Other | 83 | 23 | 366 | 248 | ||||||||||||
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Income before income taxes | 17,731 | 18,272 | 45,849 | 42,147 | ||||||||||||
Income tax provision | 5,721 | 6,723 | 15,502 | 14,792 | ||||||||||||
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Net income | $ | 12,010 | $ | 11,549 | $ | 30,347 | $ | 27,355 | ||||||||
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Other comprehensive income, net of tax: | ||||||||||||||||
Unrealized gain (loss) on cash flow hedge, net of tax (provision) benefit of ($21) and $30 for the three and nine months ended September 30, 2017, respectively | 32 | — | (45 | ) | — | |||||||||||
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Comprehensive income | $ | 12,042 | $ | 11,549 | $ | 30,302 | $ | 27,355 | ||||||||
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Basic and diluted net income per share | $ | 0.38 | $ | 0.37 | $ | 0.96 | $ | 0.87 | ||||||||
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Weighted average shares outstanding: | ||||||||||||||||
Basic | 31,659,503 | 31,323,600 | 31,632,400 | 31,294,596 | ||||||||||||
Diluted | 31,766,881 | 31,377,790 | 31,712,515 | 31,351,991 | ||||||||||||
| Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| Net revenue | $ | 719,114 | $ | 509,763 | $ | 1,983,355 | $ | 1,434,927 | |||||||||||||||
| Cost of sales | 497,837 | 353,879 | 1,372,966 | 1,001,730 | |||||||||||||||||||
| Gross profit | 221,277 | 155,884 | 610,389 | 433,197 | |||||||||||||||||||
| Operating expenses | |||||||||||||||||||||||
| Selling | 31,651 | 24,188 | 86,214 | 67,677 | |||||||||||||||||||
| Administrative | 84,345 | 68,056 | 247,519 | 199,607 | |||||||||||||||||||
| Amortization | 11,370 | 9,224 | 33,728 | 26,798 | |||||||||||||||||||
| Operating income | 93,911 | 54,416 | 242,928 | 139,115 | |||||||||||||||||||
| Other expense, net | |||||||||||||||||||||||
| Interest expense, net | 10,668 | 7,687 | 31,669 | 22,781 | |||||||||||||||||||
| Other expense (income) | 185 | (483) | 698 | (494) | |||||||||||||||||||
| Income before income taxes | 83,058 | 47,212 | 210,561 | 116,828 | |||||||||||||||||||
| Income tax provision | 22,080 | 12,320 | 55,857 | 27,432 | |||||||||||||||||||
| Net income | $ | 60,978 | $ | 34,892 | $ | 154,704 | $ | 89,396 | |||||||||||||||
| Other comprehensive income, net of tax: | |||||||||||||||||||||||
| Net change on cash flow hedges, net of tax provision of $(5,105) and $(454) for the three months ended September 30, 2022 and 2021, respectively, and $(15,138) and $(2,638) for the nine months ended September 30, 2022 and 2021, respectively | 14,379 | 1,292 | 42,640 | 7,762 | |||||||||||||||||||
| Comprehensive income | $ | 75,357 | $ | 36,184 | $ | 197,344 | $ | 97,158 | |||||||||||||||
| Earnings Per Share: | |||||||||||||||||||||||
| Basic | $ | 2.14 | $ | 1.19 | $ | 5.36 | $ | 3.05 | |||||||||||||||
| Diluted | $ | 2.13 | $ | 1.18 | $ | 5.33 | $ | 3.02 | |||||||||||||||
| Weighted average shares outstanding: | |||||||||||||||||||||||
| Basic | 28,478,954 | 29,404,257 | 28,851,389 | 29,355,538 | |||||||||||||||||||
| Diluted | 28,595,707 | 29,620,748 | 29,020,509 | 29,615,162 | |||||||||||||||||||
| Cash dividends declared per share | $ | 0.32 | $ | 0.30 | $ | 1.85 | $ | 0.90 | |||||||||||||||
| Common Stock | Additional Paid In | Accumulated | Treasury Shares | Accumulated Comprehensive | Stockholders’ | |||||||||||||||||||||||||||
| Shares | Amount | Capital | Deficit | Shares | Amount | Loss | Equity | |||||||||||||||||||||||||
BALANCE—January 1, 2016 | 31,982,888 | $ | 320 | $ | 156,688 | $ | (31,142 | ) | (616,560 | ) | $ | (11,383 | ) | $ | — | $ | 114,483 | |||||||||||||||
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Net Income | 27,355 | 27,355 | ||||||||||||||||||||||||||||||
Issuance of Common Stock Awards to Employees | 143,528 | 1 | (1 | ) | — | |||||||||||||||||||||||||||
Surrender of Common Stock Awards by Employees | (33,091 | ) | (836 | ) | (836 | ) | ||||||||||||||||||||||||||
Share-Based Compensation Expense | 1,231 | 1,231 | ||||||||||||||||||||||||||||||
Share-Based Compensation Issued to Directors | 8,760 | 300 | 300 | |||||||||||||||||||||||||||||
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BALANCE—September 30, 2016 | 32,135,176 | $ | 321 | $ | 158,218 | $ | (3,787 | ) | (649,651 | ) | $ | (12,219 | ) | $ | — | $ | 142,533 | |||||||||||||||
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| Common Stock | Additional Paid In | Retained | Treasury Shares | Accumulated Comprehensive | Stockholders’ | |||||||||||||||||||||||||||
| Shares | Amount | Capital | Earnings | Shares | Amount | Loss | Equity | |||||||||||||||||||||||||
BALANCE—January 1, 2017 | 32,135,176 | $ | 321 | $ | 158,581 | $ | 7,294 | (650,402 | ) | $ | (12,219 | ) | $ | — | $ | 153,977 | ||||||||||||||||
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Net Income | 30,347 | 30,347 | ||||||||||||||||||||||||||||||
Purchase of Remaining Interest in Subsidiary | (1,890 | ) | (1,890 | ) | ||||||||||||||||||||||||||||
Issuance of Common Stock for Acquisition | 282,577 | 3 | 10,856 | 10,859 | ||||||||||||||||||||||||||||
Issuance of Common Stock Awards to Employees | 101,241 | 1 | (1 | ) | — | |||||||||||||||||||||||||||
Surrender of Common Stock Awards by Employees | (11,971 | ) | (550 | ) | (550 | ) | ||||||||||||||||||||||||||
Share-Based Compensation Expense | 4,360 | 4,360 | ||||||||||||||||||||||||||||||
Share-Based Compensation Issued to Directors | 5,940 | 300 | 300 | |||||||||||||||||||||||||||||
Other Comprehensive Loss, Net of Tax | (45 | ) | (45 | ) | ||||||||||||||||||||||||||||
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BALANCE—September 30, 2017 | 32,524,934 | $ | 325 | $ | 172,206 | $ | 37,641 | (662,373 | ) | $ | (12,769 | ) | $ | (45 | ) | $ | 197,358 | |||||||||||||||
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| Common Stock | Additional Paid In Capital | Retained Earnings | Treasury Stock | Accumulated Other Comprehensive Loss | Stockholders’ Equity | ||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | ||||||||||||||||||||||||||||||||||||||||||||
| BALANCE - July 1, 2021 | 33,264,517 | $ | 333 | $ | 205,597 | $ | 306,107 | (3,562,942) | $ | (147,204) | $ | (2,293) | $ | 362,540 | |||||||||||||||||||||||||||||||||
| Net income | 34,892 | 34,892 | |||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock awards to employees | 7,142 | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Surrender of common stock awards | (1,562) | (24) | (24) | ||||||||||||||||||||||||||||||||||||||||||||
| Share-based compensation expense | 2,812 | 2,812 | |||||||||||||||||||||||||||||||||||||||||||||
| Share-based compensation issued to directors | 126 | 126 | |||||||||||||||||||||||||||||||||||||||||||||
| Dividend declared ($0.30 per share) | (8,912) | (8,912) | |||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income, net of tax | 1,292 | 1,292 | |||||||||||||||||||||||||||||||||||||||||||||
| BALANCE - September 30, 2021 | 33,271,659 | $ | 333 | $ | 208,535 | $ | 332,087 | (3,564,504) | $ | (147,228) | $ | (1,001) | $ | 392,726 | |||||||||||||||||||||||||||||||||
| Common Stock | Additional Paid In Capital | Retained Earnings | Treasury Stock | Accumulated Other Comprehensive Income | Stockholders’ Equity | ||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | ||||||||||||||||||||||||||||||||||||||||||||
| BALANCE - July 1, 2022 | 33,428,587 | $ | 334 | $ | 222,270 | $ | 401,326 | (4,682,973) | $ | (251,363) | $ | 28,034 | $ | 400,601 | |||||||||||||||||||||||||||||||||
| Net income | 60,978 | 60,978 | |||||||||||||||||||||||||||||||||||||||||||||
| Surrender of common stock awards | (554) | (5) | (5) | ||||||||||||||||||||||||||||||||||||||||||||
| Share-based compensation expense | 2,967 | 2,967 | |||||||||||||||||||||||||||||||||||||||||||||
| Share-based compensation issued to directors | 970 | 140 | 140 | ||||||||||||||||||||||||||||||||||||||||||||
| Dividends declared ($0.32 per share) | (9,018) | (9,018) | |||||||||||||||||||||||||||||||||||||||||||||
| Common stock repurchase | (141,932) | (12,528) | (12,528) | ||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income, net of tax | 14,379 | 14,379 | |||||||||||||||||||||||||||||||||||||||||||||
| BALANCE - September 30, 2022 | 33,429,557 | $ | 334 | $ | 225,377 | $ | 453,286 | (4,825,459) | $ | (263,896) | $ | 42,413 | $ | 457,514 | |||||||||||||||||||||||||||||||||
| Common Stock | Additional Paid In Capital | Retained Earnings | Treasury Stock | Accumulated Other Comprehensive Loss | Stockholders’ Equity | ||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | ||||||||||||||||||||||||||||||||||||||||||||
| BALANCE - January 1, 2021 | 33,141,879 | $ | 331 | $ | 199,847 | $ | 269,420 | (3,518,607) | $ | (141,653) | $ | (8,763) | $ | 319,182 | |||||||||||||||||||||||||||||||||
| Net income | 89,396 | 89,396 | |||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock awards to employees | 125,550 | 2 | (2) | — | |||||||||||||||||||||||||||||||||||||||||||
| Surrender of common stock awards | (45,897) | (5,575) | (5,575) | ||||||||||||||||||||||||||||||||||||||||||||
| Share-based compensation expense | 8,351 | 8,351 | |||||||||||||||||||||||||||||||||||||||||||||
| Share-based compensation issued to directors | 4,230 | 339 | 339 | ||||||||||||||||||||||||||||||||||||||||||||
| Dividends declared ($0.90 per share) | (26,729) | (26,729) | |||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income, net of tax | 7,762 | 7,762 | |||||||||||||||||||||||||||||||||||||||||||||
| BALANCE - September 30, 2021 | 33,271,659 | $ | 333 | $ | 208,535 | $ | 332,087 | (3,564,504) | $ | (147,228) | $ | (1,001) | $ | 392,726 | |||||||||||||||||||||||||||||||||
| Common Stock | Additional Paid In Capital | Retained Earnings | Treasury Stock | Accumulated Other Comprehensive Income (Loss) | Stockholders’ Equity | ||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | ||||||||||||||||||||||||||||||||||||||||||||
| BALANCE - January 1, 2022 | 33,271,659 | $ | 333 | $ | 211,430 | $ | 352,543 | (3,565,258) | $ | (147,239) | $ | (227) | $ | 416,840 | |||||||||||||||||||||||||||||||||
| Net income | 154,704 | 154,704 | |||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock awards to employees | 112,389 | 1 | (1) | — | |||||||||||||||||||||||||||||||||||||||||||
| Surrender of common stock awards | (53,599) | (4,464) | (4,464) | ||||||||||||||||||||||||||||||||||||||||||||
| Share-based compensation expense | 9,559 | 9,559 | |||||||||||||||||||||||||||||||||||||||||||||
| Share-based compensation issued to directors | 6,305 | 389 | 389 | ||||||||||||||||||||||||||||||||||||||||||||
| Issuance of awards previously classified as liability awards | 39,204 | 4,000 | 4,000 | ||||||||||||||||||||||||||||||||||||||||||||
| Dividends declared ($1.85 per share) | (53,961) | (53,961) | |||||||||||||||||||||||||||||||||||||||||||||
| Common stock repurchase | (1,206,602) | (112,193) | (112,193) | ||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income, net of tax | 42,640 | 42,640 | |||||||||||||||||||||||||||||||||||||||||||||
| BALANCE - September 30, 2022 | 33,429,557 | $ | 334 | $ | 225,377 | $ | 453,286 | (4,825,459) | $ | (263,896) | $ | 42,413 | $ | 457,514 | |||||||||||||||||||||||||||||||||
| Nine months ended September 30, | ||||||||
| 2017 | 2016 | |||||||
Cash flows from operating activities | ||||||||
Net income | $ | 30,347 | $ | 27,355 | ||||
Adjustments to reconcile net income to net cash provided by operating activities | ||||||||
Depreciation and amortization of property and equipment | 20,732 | 17,240 | ||||||
Amortization of intangibles | 19,790 | 8,178 | ||||||
Amortization of deferred financing costs and debt discount | 768 | 282 | ||||||
Provision for doubtful accounts | 2,208 | 1,960 | ||||||
Write-off of debt issuance costs | 1,201 | 286 | ||||||
Gain on sale of property and equipment | (329 | ) | (218 | ) | ||||
Noncash stock compensation | 4,750 | 1,531 | ||||||
Deferred income taxes | — | 708 | ||||||
Changes in assets and liabilities, excluding effects of acquisitions | ||||||||
Accounts receivable | (24,636 | ) | (17,878 | ) | ||||
Inventories | 68 | (3,158 | ) | |||||
Other assets | 695 | 4,727 | ||||||
Accounts payable | 2,665 | 3,879 | ||||||
Income taxes payable/receivable | (10,167 | ) | 3,652 | |||||
Other liabilities | 5,249 | 6,033 | ||||||
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Net cash provided by operating activities | 53,341 | 54,577 | ||||||
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Cash flows from investing activities | ||||||||
Purchases of investments | (25,195 | ) | — | |||||
Purchases of property and equipment | (22,947 | ) | (19,169 | ) | ||||
Acquisitions of businesses, net of cash acquired of $247 and $0, respectively | (130,994 | ) | (36,427 | ) | ||||
Proceeds from sale of property and equipment | 682 | 523 | ||||||
Other | (1,845 | ) | — | |||||
|
|
|
| |||||
Net cash used in investing activities | (180,299 | ) | (55,073 | ) | ||||
|
|
|
| |||||
Cash flows from financing activities | ||||||||
Proceeds from revolving line of credit under credit agreement applicable to respective period (Note 5) | — | 37,975 | ||||||
Payments on revolving line of credit under credit agreement applicable to respective period (Note 5) | — | (37,975 | ) | |||||
Proceeds from term loan under credit agreement applicable to respective period (Note 5) | 300,000 | 100,000 | ||||||
Payments on term loan under credit agreement applicable to respective period (Note 5) | (97,000 | ) | (50,625 | ) | ||||
Proceeds from delayed draw term loan under credit agreement applicable to respective period (Note 5) | 112,500 | 12,500 | ||||||
Payments on delayed draw term loan under credit agreement applicable to respective period (Note 5) | (125,000 | ) | (50,000 | ) | ||||
Proceeds from vehicle and equipment notes payable | 15,817 | 16,310 | ||||||
Debt issuance costs | (8,175 | ) | (1,238 | ) | ||||
Principal payments on long term debt | (7,201 | ) | (4,055 | ) | ||||
Principal payments on capital lease obligations | (5,583 | ) | (6,596 | ) | ||||
Acquisition-related obligations | (3,434 | ) | (2,732 | ) | ||||
Surrender of common stock awards by employees | (550 | ) | (836 | ) | ||||
Purchase of remaining interest in subsidiary | (1,890 | ) | — | |||||
|
|
|
| |||||
Net cash provided by financing activities | 179,484 | 12,728 | ||||||
|
|
|
| |||||
Net change in cash | 52,526 | 12,232 | ||||||
Cash at beginning of period | 14,482 | 6,818 | ||||||
|
|
|
| |||||
Cash at end of period | $ | 67,008 | $ | 19,050 | ||||
|
|
|
| |||||
Supplemental disclosures of cash flow information | ||||||||
Net cash paid during the period for: | ||||||||
Interest | $ | 9,733 | $ | 3,904 | ||||
Income taxes, net of refunds | 26,292 | 10,428 | ||||||
Supplemental disclosure of noncash investing and financing activities | ||||||||
Common stock issued for acquisition of business | 10,859 | — | ||||||
Vehicles capitalized under capital leases and related lease obligations | 4,073 | 2,956 | ||||||
Seller obligations in connection with acquisition of businesses | 3,759 | 2,849 | ||||||
Unpaid purchases of property and equipment included in accounts payable | 1,108 | 2,140 | ||||||
| Nine months ended September 30, | |||||||||||
| 2022 | 2021 | ||||||||||
| Cash flows from operating activities | |||||||||||
| Net income | $ | 154,704 | $ | 89,396 | |||||||
| Adjustments to reconcile net income to net cash provided by operating activities | |||||||||||
| Depreciation and amortization of property and equipment | 35,153 | 32,498 | |||||||||
| Amortization of operating lease right-of-use assets | 19,832 | 16,464 | |||||||||
| Amortization of intangibles | 33,728 | 26,798 | |||||||||
| Amortization of deferred financing costs and debt discount | 1,436 | 993 | |||||||||
| Provision for credit losses | 2,754 | 1,135 | |||||||||
| Gain on sale of property and equipment | (1,048) | (1,405) | |||||||||
| Noncash stock compensation | 10,290 | 10,228 | |||||||||
| Other, net | 1,509 | 2,414 | |||||||||
| Changes in assets and liabilities, excluding effects of acquisitions | |||||||||||
| Accounts receivable | (98,528) | (23,224) | |||||||||
| Inventories | (23,071) | (37,122) | |||||||||
| Proceeds from termination of interest rate swap agreements | 25,462 | — | |||||||||
| Other assets | 4,773 | (8,116) | |||||||||
| Accounts payable | 20,290 | 14,120 | |||||||||
| Income taxes receivable/payable | 12,354 | (107) | |||||||||
| Other liabilities | (971) | (7,594) | |||||||||
| Net cash provided by operating activities | 198,667 | 116,478 | |||||||||
| Cash flows from investing activities | |||||||||||
| Purchases of investments | (344,388) | — | |||||||||
| Maturities of short term investments | 320,000 | — | |||||||||
| Purchases of property and equipment | (35,212) | (27,898) | |||||||||
| Acquisitions of businesses, net of cash acquired of $330 and $1,640 in 2022 and 2021, respectively | (75,779) | (94,500) | |||||||||
| Proceeds from sale of property and equipment | 1,418 | 2,219 | |||||||||
| Other | (5,974) | (1,430) | |||||||||
| Net cash used in investing activities | (139,935) | (121,609) | |||||||||
| Cash flows from financing activities | |||||||||||
| Payments on Term Loan | (3,750) | — | |||||||||
| Proceeds from vehicle and equipment notes payable | 20,492 | 20,753 | |||||||||
| Debt issuance costs | (655) | — | |||||||||
| Principal payments on long-term debt | (23,340) | (19,688) | |||||||||
| Principal payments on finance lease obligations | (1,661) | (1,573) | |||||||||
| Dividends paid | (53,821) | (26,428) | |||||||||
| Acquisition-related obligations | (9,423) | (2,442) | |||||||||
| Repurchase of common stock | (112,193) | — | |||||||||
| Surrender of common stock awards by employees | (4,464) | (5,576) | |||||||||
| Net cash used in financing activities | (188,815) | (34,954) | |||||||||
| Net change in cash and cash equivalents | (130,083) | (40,085) | |||||||||
| Cash and cash equivalents at beginning of period | 333,485 | 231,520 | |||||||||
| Cash and cash equivalents at end of period | $ | 203,402 | $ | 191,435 | |||||||
| Supplemental disclosures of cash flow information | |||||||||||
| Net cash paid during the period for: | |||||||||||
| Interest | $ | 40,639 | $ | 23,748 | |||||||
| Income taxes, net of refunds | 43,512 | 27,428 | |||||||||
| Supplemental disclosure of noncash activities | |||||||||||
| Right-of-use assets obtained in exchange for operating lease obligations | 22,056 | 23,543 | |||||||||
| Release of indemnification of acquisition-related debt | 980 | 2,036 | |||||||||
| Property and equipment obtained in exchange for finance lease obligations | 4,411 | 1,918 | |||||||||
| Seller obligations in connection with acquisition of businesses | 25,534 | 18,987 | |||||||||
| Unpaid purchases of property and equipment included in accounts payable | 857 | 1,327 | |||||||||
| Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||
Residential | 84 | % | 89 | % | 83 | % | 88 | % | ||||||||
Commercial | 16 | 11 | 17 | 12 | ||||||||||||
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| 100 | % | 100 | % | 100 | % | 100 | % | |||||||||
INSTALLED BUILDING PRODUCTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
quarters.
current year presentation.
Pronouncements Not Yet Adopted
| Standard | Description | Effective Date | Effect on the financial statements or other significant matters | |||||||||||||||||
ASU 2021-08, Business Combinations (Topic 805), Accounting for Contract Assets and Contract Liabilities from Contracts with Customers | This pronouncement amends Topic 805 to require an acquirer to account for revenue contracts in a business combination in accordance with Topic 606 as if the acquirer had originated the contracts. | Annual periods beginning after December 15, 2022, including interim periods therein. Early adoption is permitted. | We are currently assessing the impact of adoption on our consolidated financial statements. | |||||||||||||||||
Revenue and Cost Recognition
Revenue from the sale and installation of products is recognized when all of the following have occurred: (i) persuasive evidence of an arrangement exists; (ii) delivery has occurred or services have been rendered; (iii) the price is fixed or determinable; and (iv) the ability to collect is reasonably assured. We recognize revenue using eitherover time utilizing a cost-to-cost input method as we believe this represents the completed contract method orbest measure of when goods and services are transferred to thepercentage-of-completion method of accounting, depending primarily on length of time required to complete the contract. The completed contract method is used for short-term contracts for which financial position and results of operations reported on the completed-contract basis would not vary materially from those resulting from use of thepercentage-of-completion method. Revenue from the sale and installation of products is recognized net of adjustments and discounts and, for revenue using the completed contract method of accounting, at the time the installation is complete. customer. When thepercentage-of-completionthis method is used, we estimate the costs to complete individual contracts and record as revenue that portion of the total contract price whichthat is considered complete based on the relationship of costs incurred to date to total anticipated costs. Under the cost-to-cost method, the use of estimated costs to complete each contract is a significant variable in the process of determining recognized revenue, requires judgment and can change throughout the duration of a contract due to contract modifications and other factors impacting job completion. The costs of earned revenue include all direct material and labor costs and those indirect costs related to contract performance, such as indirect labor, supplies, tools and repairs. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined.
Investment Policy
Marketable securities with original maturities longer than three months but less than one year
INSTALLED BUILDING PRODUCTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Accounts Receivable
We account retainage and is common practice in the construction industry, as it allows for trade receivables based on amounts billed to customers. Past due receivables are determined based on contractual terms. We do not accrue interest on any of our trade receivables.
Retainage receivables represent the amount retained by our customers to ensure the quality of the installation and is received after satisfactory completion of each installation project. Management regularly reviews aging of retainageservice performed prior to full payment. Retainage receivables and changes in payment trends and records an allowance when collection of amounts due are considered not probable. Amounts retained by project owners under construction contracts and included in accounts receivable and othernon-currentclassified as current or long-term assets were $22.1 million and $0.6 million as of September 30, 2017, respectively. Amounts retained by project owners under construction contracts and included in accounts receivable as of December 31, 2016 were $10.3 million.
Share-Based Compensation
Our share-based compensation program is designed to attract and retain employees while also aligning employees’ interests with the interests of our stockholders. Restricted stock awards are periodically granted to certain employees, officers andnon-employee members of our board of directors under the stockholder-approved 2014 Omnibus Incentive Plan.
Equity-based awards: Certain of our stock awards are deemed to be equity-based with a service condition and do not contain a market or performance condition with the exception of performance-based awards granted to certain officers and performance-based restricted stock units. Fair value of thenon-performance-based awards to employees and officers is measured at the grant date and amortized to expense over the vesting period of the awards using the straight-line attribution method for all service-based awards with a graded vesting feature. This fair value is reduced by assumed forfeitures and adjusted for actual forfeitures until vesting. We also issue performance stock-based awards to certain officers under our 2014 Omnibus Incentive Plan. The performance-based compensation expense is recorded over the requisite service period using the graded-vesting method for the entire award. Performance-based stock awards are accounted for at fair value at date of grant. We also periodically grant restricted stock units to certain employees under the stockholder-approved 2014 Omnibus Incentive Plan. These units convert to shares upon meeting time- and performance-based requirements.
Liability-based awards:Certain of our stock awards represent a predominately-fixed monetary amount that is to be settled with a variable number of shares. These awards contain both time and performance requirements, and are deemed to be liability-based, which requires that were-measure to reflect the fair value at the end of each reporting period. The change in fair value each reporting period is recorded as compensation cost, with a corresponding increase or decrease in the share-based liability, either immediately or over the remaining service period depending on the vested status of the award.
Compensation expense for both equity and liability-based restricted stock units is recorded based on an assessment each reporting period of the probability that certain performance goals will be met during the contingent vesting period. If performance goals are not probable of occurrence, no compensation expense will be recognized. If performance goals that were previously deemed probable are not or are not expected to be met, the previously recognized compensation cost related to such performance goals will be reversed. Employees and officers are subject to tax at the vesting date based on the market priceexpected time to project completion.
Use of Estimates
Preparation
| Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||||||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||||||||||||||||||||||||||
| Installation: | |||||||||||||||||||||||||||||||||||||||||||||||
| Residential new construction | $ | 532,299 | 74 | % | $ | 385,401 | 76 | % | $ | 1,480,214 | 75 | % | $ | 1,082,379 | 75 | % | |||||||||||||||||||||||||||||||
| Repair and remodel | 39,139 | 6 | % | 31,276 | 6 | % | 109,745 | 5 | % | 89,810 | 7 | % | |||||||||||||||||||||||||||||||||||
| Commercial | 101,478 | 14 | % | 87,484 | 17 | % | 282,585 | 14 | % | 247,113 | 17 | % | |||||||||||||||||||||||||||||||||||
| Net revenue, Installation | $ | 672,916 | 94 | % | $ | 504,161 | 99 | % | $ | 1,872,544 | 94 | % | $ | 1,419,302 | 99 | % | |||||||||||||||||||||||||||||||
Other (1) | 46,198 | 6 | % | 5,602 | 1 | % | 110,811 | 6 | % | 15,625 | 1 | % | |||||||||||||||||||||||||||||||||||
| Net revenue, as reported | $ | 719,114 | 100 | % | $ | 509,763 | 100 | % | $ | 1,983,355 | 100 | % | $ | 1,434,927 | 100 | % | |||||||||||||||||||||||||||||||
| Three months ended September 30, | Nine months ended September 30, | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Installation: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Insulation | $ | 429,091 | 60 | % | $ | 318,753 | 63 | % | $ | 1,203,635 | 61 | % | $ | 905,553 | 63 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shower doors, shelving and mirrors | 46,735 | 7 | % | 35,411 | 7 | % | 124,339 | 6 | % | 101,830 | 7 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Garage doors | 45,224 | 6 | % | 26,951 | 5 | % | 123,715 | 6 | % | 77,434 | 5 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Waterproofing | 31,088 | 4 | % | 34,514 | 7 | % | 95,306 | 5 | % | 98,726 | 7 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Rain gutters | 31,065 | 4 | % | 21,807 | 4 | % | 83,334 | 4 | % | 62,270 | 4 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fireproofing/firestopping | 17,159 | 3 | % | 17,684 | 3 | % | 49,247 | 3 | % | 43,155 | 3 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Window blinds | 16,585 | 2 | % | 13,197 | 3 | % | 45,058 | 2 | % | 37,398 | 3 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other building products | 55,969 | 8 | % | 35,844 | 7 | % | 147,910 | 7 | % | 92,936 | 7 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net revenue, Installation | $ | 672,916 | 94 | % | $ | 504,161 | 99 | % | $ | 1,872,544 | 94 | % | $ | 1,419,302 | 99 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Other (1) | 46,198 | 6 | % | 5,602 | 1 | % | 110,811 | 6 | % | 15,625 | 1 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net revenue, as reported | $ | 719,114 | 100 | % | $ | 509,763 | 100 | % | $ | 1,983,355 | 100 | % | $ | 1,434,927 | 100 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| September 30, 2022 | December 31, 2021 | ||||||||||
| Contract assets | $ | 37,956 | $ | 32,679 | |||||||
| Contract liabilities | (18,364) | (14,153) | |||||||||
| September 30, 2022 | December 31, 2021 | ||||||||||
| Costs incurred on uncompleted contracts | $ | 246,867 | $ | 206,050 | |||||||
| Estimated earnings | 108,241 | 106,163 | |||||||||
| Total | 355,108 | 312,213 | |||||||||
| Less: Billings to date | 324,130 | 285,978 | |||||||||
| Net under billings | $ | 30,978 | $ | 26,235 | |||||||
| September 30, 2022 | December 31, 2021 | ||||||||||
| Costs and estimated earnings in excess of billings on uncompleted contracts (contract assets) | $ | 37,956 | $ | 32,679 | |||||||
| Billings in excess of costs and estimated earnings on uncompleted contracts (contract liabilities) | (6,978) | (6,444) | |||||||||
| Net under billings | $ | 30,978 | $ | 26,235 | |||||||
Advertising Costs
Advertising costs are generally expensed as incurred. Advertising expense was approximately $0.8 million and $2.4 million forcustomer payments. During the three and nine months ended September 30, 2017, respectively, and $0.82022, we recognized $0.4 million and $2.2$13.6 million forof revenue that was included in the contract liability balance at December 31, 2021. We did not recognize any impairment losses on our receivables and contract assets during the three and nine months ended September 30, 2016, respectively,2022 or 2021.
Recently Adopted Accounting Pronouncements
In July 2015,
In March 2016, the FASB issued ASU2016-06, “Derivatives and Hedging (Topic 815)credit losses were as follows (in thousands): Contingent Put and Call Options in Debt Instruments.” This ASU clarifies the requirement for assessing whether contingent call/put options that can accelerate the payment
| Balance as of January 1, 2022 | $ | 8,717 | |||
| Current period provision | 2,754 | ||||
| Recoveries collected and additions | 181 | ||||
| Amounts written off | (2,569) | ||||
| Balance as of September 30, 2022 | $ | 9,083 | |||
Recently Issued Accounting Pronouncements Not Yet Adopted
In May 2014, the FASB issued ASU2014-09, “Revenue from Contracts with Customers (Topic 606).” ASU2014-09 and related subsequently issued amendments set forth a new revenue recognition model that requires identifying the contract(s) with a customer, identifying the performance obligations in the contract, determining the transaction price, allocating the transaction price to the performance obligations and recognizing the revenue upon satisfaction of performance obligations. In July 2015, the FASB voted to defer the application of the provisions of this standard for public companies until annual reporting periods beginning after December 15, 2017, including interim periods within those reporting periods. We have substantially completed our assessment on the applicability of the standard on accounting for contracts with customers with the exception of certain 2017 business combinations which we are currently assessing. The standard is expected to result in the disaggregation of certain of our insulation contracts into multiple separately identifiable performance obligations as well as additional revenue recognition disclosures. Under current accounting standards, we consider the installation service to represent one performance obligation, whereas in accordance with this ASU, we have identified multiple phases to certain of our insulation projects that should be considered separate performance obligations. Currently, we intend to adopt the new standard using the modified retrospective approach, which would allow us to recognize the cumulative effect of initially applying the standard as an adjustment to the opening balance of retained earnings.
In February 2016, the FASB issued ASU2016-02, “Leases (Topic 842).” This update amends the existing accounting standards for lease accounting, including requiring lessees to recognize most leases on their balance sheets and making targeted changes to lessor accounting. ASU2016-02 requires a modified retrospective transition approach for all leases existing at, or entered into after, the date of initial application, with an option to use certain transition relief. For public business entities, this update is effective for annual reporting periods beginning after December 15, 2018, including interim periods within those fiscal years, and early adoption is permitted as of the standard’s issuance date. We are evaluating whether this ASU will have a material impact on our consolidated financial statements.
In May 2016, the FASB issued ASUNo. 2016-11, “Revenue Recognition (Topic 605) and Derivatives and Hedging (Topic 815): Rescission of SEC Guidance Because of Accounting Standards Updates2014-09 and2014-16 pursuant to Staff announcements at the March 3, 2016 EITF Meeting.” This ASU rescinds from the FASB Accounting Standards Codification certain SEC paragraphs as a result of two SEC Staff Announcements at the March 3, 2016 meeting. For public entities, the amendments related to Topic 605 are effective for interim and annual reporting periods beginning after December 15, 2017 and amendments related to Topic 815 are effective for interim and annual reporting periods beginning after December 15, 2015. We have evaluated the applicability of this ASU and have determined it will not have a material impact on our consolidated financial statements.
In June 2016, the FASB issued ASU2016-13, “Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” This ASU amends the accounting for credit losses onavailable-for-sale debt securities and purchased financial assets with credit deterioration. In addition, these amendments require the measurement of all expected credit losses for financial assets, including trade accounts receivable, held at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts. For public business entities, this update is effective for financial statements issued for fiscal years beginning after December 15, 2019 and interim periods within those fiscal years. We are evaluating whether this ASU will have a material impact on our consolidated financial statements.
INSTALLED BUILDING PRODUCTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
In August 2016, the FASB issued ASU2016-15, “Statement of Cash Flows: Clarification of Certain Cash Receipts and Cash Payments (Topic 230).” This ASU addresses the diversity in practice related to the classification of certain cash receipts and payments in the statement of cash flows by adding or clarifying guidance on eight specific cash flow issues. We have determined that this update addresses one issue that specifically impacts us, which is the classification of contingent consideration payments made after a business combination, and we are evaluating whether it will have a material impact on our consolidated financial statements. For public business entities, this update is effective for financial statements issued for fiscal years beginning after December 15, 2017 and interim periods within those fiscal years.
In October 2016, the FASB issued ASU2016-16, “Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other than Inventory.” This ASU aligns the recognition of income tax consequences for intra-entity transfers of assets other than inventory with International Financial Reporting Standards (“IFRS”). For public business entities, this update is effective for financial statements issued for fiscal years beginning after December 15, 2017 and interim periods within those fiscal years. We have evaluated the applicability of this ASU and have determined it will not have a material impact on our consolidated financial statements.
In November 2016, the FASB issued ASUNo. 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash.” This ASU provides guidance on the presentation of restricted cash or restricted cash equivalents in the statement of cash flows. This standard is effective for interim and annual reporting periods beginning after December 15, 2017. We will adopt this standard effective January 1, 2018 as we expect it to be applicable to us at that time.
In January 2017, the FASB issued ASU2017-01, “Business Combinations (Topic 805): Clarifying the Definition of a Business.” This ASU clarifies the definition of a business to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. For public business entities, this update is effective for financial statements issued for fiscal years beginning after December 15, 2017 and interim periods within those fiscal years. We have evaluated the applicability of this ASU and have determined it will not have a material impact on our consolidated financial statements.
In May 2017, the FASB issued ASU2017-09, “Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting.” This ASU provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. The amendments should be applied prospectively to an award modified on or after the adoption date. For public business entities, this update is effective for financial statements issued for fiscal years beginning after December 15, 2017 and interim periods within those fiscal years. Early adoption is permitted. We have evaluated the applicability of this ASU and have determined it will not have a material impact on our consolidated financial statements.
In August 2017, the FASB issued ASU2017-12, “Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities.” This ASU better aligns a company’s risk management activities and financial reporting for hedging relationships and makes certain improvements to simplify the application of hedge accounting guidance. For public business entities, this update is effective for financial statements issued for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years. We are evaluating whether this ASU will have a material impact on our consolidated financial statements.
INSTALLED BUILDING PRODUCTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
AND CASH AND CASH EQUIVALENTS
2021, respectively. See Note 9, Fair Value Measurements, for additional information.
| Goodwill (Gross) | Accumulated Impairment Losses | Goodwill (Net) | ||||||||||
January 1, 2017 | $ | 177,090 | $ | (70,004 | ) | $ | 107,086 | |||||
Business Combinations | 46,059 | — | 46,059 | |||||||||
Other | 515 | — | 515 | |||||||||
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September 30, 2017 | $ | 223,664 | $ | (70,004 | ) | $ | 153,660 | |||||
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| Installation | Other | Consolidated | |||||||||||||||
| Goodwill (gross) - January 1, 2022, after change in reporting units | $ | 331,782 | $ | 60,739 | $ | 392,521 | |||||||||||
| Business combinations | 6,389 | 27,595 | 33,984 | ||||||||||||||
| Other | 111 | — | 111 | ||||||||||||||
| Goodwill (gross) - September 30, 2022 | 338,282 | 88,334 | 426,616 | ||||||||||||||
| Accumulated impairment losses | (70,004) | — | (70,004) | ||||||||||||||
| Goodwill (net) - September 30, 2022 | $ | 268,278 | $ | 88,334 | $ | 356,612 | |||||||||||
2022. For additional information regarding changes to goodwill resulting from acquisitions, see Note 17, Business Combinations.
| As of September 30, 2017 | As of December 31, 2016 | |||||||||||||||||||||||
| Gross Carrying Amount | Accumulated Amortization | Net Book Value | Gross Carrying Amount | Accumulated Amortization | Net Book Value | |||||||||||||||||||
Amortized intangibles: | ||||||||||||||||||||||||
Customer relationships | $ | 118,448 | $ | 35,560 | $ | 82,888 | $ | 80,909 | $ | 27,533 | $ | 53,376 | ||||||||||||
Covenantsnot-to-compete | 11,581 | 4,139 | 7,442 | 8,602 | 2,466 | 6,136 | ||||||||||||||||||
Trademarks and trade names | 56,781 | 13,097 | 43,684 | 37,303 | 10,498 | 26,805 | ||||||||||||||||||
Backlog | 13,400 | 6,700 | 6,700 | — | — | — | ||||||||||||||||||
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| $ | 200,210 | $ | 59,496 | $ | 140,714 | $ | 126,814 | $ | 40,497 | $ | 86,317 | |||||||||||||
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| As of September 30, | As of December 31, | ||||||||||||||||||||||||||||||||||
| 2022 | 2021 | ||||||||||||||||||||||||||||||||||
| Gross Carrying Amount | Accumulated Amortization | Net Book Value | Gross Carrying Amount | Accumulated Amortization | Net Book Value | ||||||||||||||||||||||||||||||
| Amortized intangibles: | |||||||||||||||||||||||||||||||||||
| Customer relationships | $ | 321,720 | $ | 137,495 | $ | 184,225 | $ | 292,113 | $ | 113,849 | $ | 178,264 | |||||||||||||||||||||||
| Covenants not-to-compete | 30,015 | 19,204 | 10,811 | 27,717 | 16,471 | 11,246 | |||||||||||||||||||||||||||||
| Trademarks and tradenames | 116,246 | 37,833 | 78,413 | 103,007 | 32,623 | 70,384 | |||||||||||||||||||||||||||||
| Backlog | 23,725 | 21,336 | 2,389 | 23,724 | 19,197 | 4,527 | |||||||||||||||||||||||||||||
| $ | 491,706 | $ | 215,868 | $ | 275,838 | $ | 446,561 | $ | 182,140 | $ | 264,421 | ||||||||||||||||||||||||
Remainder of 2017 | $ | 6,916 | ||
2018 | 22,983 | |||
2019 | 17,928 | |||
2020 | 17,212 | |||
2021 | 16,194 | |||
Thereafter | 59,481 |
| Remainder of 2022 | $ | 11,113 | |||
| 2023 | 41,441 | ||||
| 2024 | 37,520 | ||||
| 2025 | 31,199 | ||||
| 2026 | 27,241 | ||||
| Thereafter | 127,324 | ||||
Debt
| As of September 30, | As of December 31, | |||||||
| 2017 | 2016 | |||||||
Term loans under agreements applicable to respective period, in effect, net of unamortized original issue discount and debt issuance costs of $6,184 and $447, respectively | $ | 293,066 | $ | 95,803 | ||||
Delayed draw term loans, in effect, net of unamortized debt issuance costs of $0 and $50, respectively | — | 12,450 | ||||||
Vehicle and equipment notes, maturing June 2022 to September 2022; payable in various monthly installments, including interest rates ranging from 2% to 4% | 46,713 | 38,186 | ||||||
Various notes payable, maturing through March 2025; payable in various installments, including interest rates ranging from 4% to 6% | 4,066 | 4,988 | ||||||
|
|
|
| |||||
| 343,845 | 151,427 | |||||||
Less: current maturities | (15,550 | ) | (17,192 | ) | ||||
|
|
|
| |||||
Long-term debt, less current maturities | $ | 328,295 | $ | 134,235 | ||||
|
|
|
| |||||
| As of September 30, | As of December 31, | ||||||||||
| 2022 | 2021 | ||||||||||
| Senior Notes due 2028, net of unamortized debt issuance costs of $3,185 and $3,633, respectively | $ | 296,815 | $ | 296,367 | |||||||
| Term loan, net of unamortized debt issuance costs of $6,009 and $6,735, respectively | 490,241 | 493,265 | |||||||||
| Vehicle and equipment notes, maturing through September 2027; payable in various monthly installments, including interest rates ranging from 1.9% to 5.6% | 69,371 | 69,228 | |||||||||
| Various notes payable, maturing through April 2025; payable in various monthly installments, including interest rates ranging from 2.0% to 5.0% | 1,973 | 4,172 | |||||||||
| 858,400 | 863,032 | ||||||||||
| Less: current maturities | (30,494) | (30,839) | |||||||||
| Long-term debt, less current maturities | $ | 827,906 | $ | 832,193 | |||||||
Senior Secured
| Remainder of 2022 | $ | 7,896 | |||
| 2023 | 29,159 | ||||
| 2024 | 23,626 | ||||
| 2025 | 17,547 | ||||
| 2026 | 12,369 | ||||
| Thereafter | 776,997 | ||||
On April 13, 2017,Agreement Amendment
Proceeds from the Senior Secured Credit Facilities were used to repay in full all amounts outstanding under the credit and security agreement, dated as of February 29, 2016, by and among the Company and the lenders named therein (the “Credit and Security Agreement”).
The Term Loan amortizes in quarterly principal payments of approximately $0.8 million starting on September 30, 2017, with any remaining unpaid balances due on April 15, 2024, which is the maturity date. Loans incurred under the ABL Revolver will have a final maturity of April 13, 2022.
Subject to certain exceptions, the Term Loan will be subject to mandatorypre-payments equal to (i) 100% of the net cash proceeds from issuances or incurrence of debt by the Company or any of its restricted subsidiaries (other than with respect to certain permitted indebtedness); (ii) 100% of the net cash proceeds from certain sales or dispositions of assets by the Company or any of its restricted subsidiaries in excess of a certain amount and subject to customary reinvestment provisions and certain other expenses; and (iii) 50% (with step-downs to 25% and 0% based upon achievement of specified net leverage ratios) of excess cash flow of the Company and its restricted subsidiaries in excess of $5.0 million, subject to customary exceptions and limitations.
Loans under the Senior Secured Credit Facilities bearbears interest based on, at the Company’s election, either the base rate or the Eurodollar rateSecured Overnight Financing Rate ("Term SOFR"), at our election, plus in each case, an applicablea margin (the “Applicable Margin”). The Applicable Margin in respect of loans under (i) the Term Loan Agreement will be (A) 3.00% in the case of Eurodollar rate loans and (B) 2.00%0.25% or 0.50% in the case of base rate loans and (ii) the ABL Facility will be (A)or 1.25%, or 1.50% or 1.75% in thefor Term SOFR advances (in each case of Eurodollar rate loans (basedbased on a measure of availability under the ABL Facility) and (B) 0.25%, 0.50% or 0.75%Credit Agreement). The amendment also allows for modification of specified fees dependent upon achieving certain sustainability targets, in addition to making other modifications to the caseABL Credit Agreement. Including outstanding letters of base rate loans (based on a measure ofcredit, our remaining availability under the ABL Facility).
In addition, we will pay customary commitment fees and letterRevolver as of credit feesSeptember 30, 2022 was $197.6 million.
The Senior Secured Credit Agreements each containRevolver, and the guarantees of those obligations, are secured by substantially all of the assets of the Company and the guarantors, subject to certain exceptions and permitted liens, including a number of customary affirmative and negativenon-financial covenants, andfirst-priority security interest in such assets that constitute ABL Priority Collateral, as defined in the ABL Credit Agreement.
Vehicle The ABL Credit Agreement and Equipment Notes
the Term Loan Agreement contain restrictive covenants that, among other things, limit the ability of the Company and certain of our subsidiaries (subject to certain exceptions) to: (i) incur additional debt and issue preferred stock; (ii) pay dividends on, redeem or repurchase stock in an aggregate amount exceeding the greater of 2.0% of market capitalization per fiscal year or certain applicable restricted payment basket amounts; (iii) prepay subordinated debt; (iv) create liens; (v) make specified types of investments; (vi) apply net proceeds from certain asset sales; (vii) engage in transactions with affiliates; (viii) merge, consolidate or sell substantially all of our assets; and (ix) pay dividends and make other distributions from subsidiaries.
arrangement under these agreements constitutes a separate note
Total gross assets relating to our master loan and equipment agreements were $66.8 million and $48.7 million as of September 30, 2017 and December 31, 2016, respectively, none of which were fully depreciated as of September 30, 2017 or December 31, 2016, respectively. The net book value of assets under these agreements was $47.3 million and $38.0 million as of September 30, 2017 and December 31, 2016, respectively. Depreciation of assets held under these agreements is included within cost of salesliabilities recorded on the Condensed Consolidated StatementsBalance Sheets:
| As of September 30, | As of December 31, | |||||||||||||||||||
| (in thousands) | Classification | 2022 | 2021 | |||||||||||||||||
| Assets | ||||||||||||||||||||
| Non-Current | ||||||||||||||||||||
| Operating | Operating lease right-of-use assets | $ | 72,226 | $ | 69,871 | |||||||||||||||
| Finance | Property and equipment, net | 7,828 | 5,266 | |||||||||||||||||
| Total lease assets | $ | 80,054 | $ | 75,137 | ||||||||||||||||
| Liabilities | ||||||||||||||||||||
| Current | ||||||||||||||||||||
| Operating | Current maturities of operating lease obligations | $ | 25,414 | $ | 23,224 | |||||||||||||||
| Financing | Current maturities of finance lease obligations | 2,275 | 1,747 | |||||||||||||||||
| Non-Current | ||||||||||||||||||||
| Operating | Operating lease obligations | 46,640 | 46,075 | |||||||||||||||||
| Financing | Finance lease obligations | 5,469 | 3,297 | |||||||||||||||||
| Total lease liabilities | $ | 79,798 | $ | 74,343 | ||||||||||||||||
| Weighted-average remaining lease term: | ||||||||||||||||||||
| Operating leases | 4.0 years | 4.3 years | ||||||||||||||||||
| Finance leases | 3.8 years | 3.3 years | ||||||||||||||||||
| Weighted-average discount rate: | ||||||||||||||||||||
| Operating leases | 4.06 | % | 3.38 | % | ||||||||||||||||
| Finance leases | 5.21 | % | 4.96 | % | ||||||||||||||||
| Three months ended September 30, | Nine months ended September 30, | |||||||||||||||||||||||||||||||
| (in thousands) | Classification | 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||||||||||
Operating lease cost(1) | Administrative | $ | 8,355 | $ | 6,927 | $ | 24,293 | $ | 19,947 | |||||||||||||||||||||||
| Finance lease cost: | ||||||||||||||||||||||||||||||||
Amortization of leased assets(2) | Cost of sales | 817 | 769 | 2,388 | 2,342 | |||||||||||||||||||||||||||
| Interest on finance lease obligations | Interest expense, net | 87 | 54 | 216 | 161 | |||||||||||||||||||||||||||
| Total lease costs | $ | 9,259 | $ | 7,750 | $ | 26,897 | $ | 22,450 | ||||||||||||||||||||||||
NOTE 6 – COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS
Uncompleted contracts were as follows$0.7 million for the three months ended September 30, 2022 and 2021, respectively, and $2.6 million and $2.2 million for the nine months ended September 30, 2022 and 2021, respectively, and short-term lease costs of $0.3 million for both the three months ended September 30, 2022 and 2021, respectively, and $0.9 million and $0.8 million for the nine months ended September 30, 2022 and 2021, respectively.
| 2017 | ||||
Costs incurred on uncompleted contracts | $ | 70,403 | ||
Estimated earnings | 38,691 | |||
|
| |||
Total | 109,094 | |||
Less: Billings to date | 108,798 | |||
|
| |||
Net under (over) billings | $ | 296 | ||
|
| |||
Net under (over) billings were as follows
| Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| Cash paid for amounts included in the measurement of lease liabilities: | |||||||||||||||||||||||
| Operating cash flows for operating leases | $ | 7,030 | $ | 5,821 | $ | 20,296 | $ | 16,763 | |||||||||||||||
| Operating cash flows for finance leases | 87 | 54 | 216 | 161 | |||||||||||||||||||
| Financing cash flows for finance leases | 576 | 532 | 1,661 | 1,573 | |||||||||||||||||||
| 2017 | ||||
Costs and estimated earnings in excess of billings on uncompleted contracts | $ | 5,323 | ||
Billings in excess of costs and estimated earnings on uncompleted contracts | (5,027 | ) | ||
|
| |||
Net under (over) billings | $ | 296 | ||
|
| |||
The asset, costs and estimated earnings in excess of billings on uncompleted contracts, represents revenues recognized in excess of amounts billed and is included in other current assets in our Condensed Consolidated Balance Sheets. The liability, billings in excess of costs and estimated earnings on uncompleted contracts, represents billings in excess of revenues recognized and is included in other current liabilities in our Condensed Consolidated Balance Sheets.
| Finance Leases | Operating Leases | ||||||||||||||||||||||
| Related Party | Other | Total Operating | |||||||||||||||||||||
| Remainder of 2022 | $ | 742 | $ | 374 | $ | 6,952 | $ | 7,326 | |||||||||||||||
| 2023 | 2,443 | 1,421 | 24,687 | 26,108 | |||||||||||||||||||
| 2024 | 2,015 | 1,175 | 16,450 | 17,625 | |||||||||||||||||||
| 2025 | 1,647 | 1,017 | 10,288 | 11,305 | |||||||||||||||||||
| 2026 | 1,315 | — | 7,232 | 7,232 | |||||||||||||||||||
| Thereafter | 411 | — | 8,714 | 8,714 | |||||||||||||||||||
| Total minimum lease payments | 8,573 | $ | 3,987 | $ | 74,323 | 78,310 | |||||||||||||||||
| Less: Amounts representing executory costs | (11) | — | |||||||||||||||||||||
| Less: Amounts representing interest | (818) | (6,256) | |||||||||||||||||||||
| Present value of future minimum lease payments | 7,744 | 72,054 | |||||||||||||||||||||
| Less: Current obligation under leases | (2,275) | (25,414) | |||||||||||||||||||||
| Long-term lease obligations | $ | 5,469 | $ | 46,640 | |||||||||||||||||||
FairValue on a Recurring Basis
lowest level of significant input to the valuation. The assets are measured at fair value when our impairment assessment indicates a carrying value for each of the assets in excess of the asset’s estimated fair value. Undiscounted cash flows, a Level 3 input, are utilized in determining estimated fair values. During each of the three and nine months ended September 30, 2022 and 2021, we did not record any impairments on these assets required to be measured at fair value on a nonrecurring basis.
ASC 820, “Fair Value Measurement,” establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:
Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.
Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.
Level 3: Significant unobservable inputs that reflect a reporting entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.
| Fair value as of September 30, 2017 | ||||||||||||||||
| Total | Level 1 | Level 2 | Level 3 | |||||||||||||
Financial assets: | ||||||||||||||||
Cash equivalents | $ | 58,825 | $ | 58,825 | $ | — | $ | — | ||||||||
Investments | 25,106 | — | 25,106 | — | ||||||||||||
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| |||||||||
Total financial assets | $ | 83,931 | $ | 58,825 | $ | 25,106 | $ | — | ||||||||
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Financial liabilities: | ||||||||||||||||
Derivative financial instruments, net of tax | $ | 45 | $ | — | $ | 45 | $ | — | ||||||||
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We had no such items upon which to report fair value as of December 31, 2016.
| As of September 30, 2022 | As of December 31, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||
| Total | Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | ||||||||||||||||||||||||||||||||||||||||
| Financial assets: | |||||||||||||||||||||||||||||||||||||||||||||||
| Cash equivalents | $ | 173,252 | $ | 173,252 | $ | — | $ | — | $ | 258,055 | $ | 258,055 | $ | — | $ | — | |||||||||||||||||||||||||||||||
| Derivative financial instruments | 42,413 | — | 42,413 | — | 14,830 | — | 14,830 | — | |||||||||||||||||||||||||||||||||||||||
| Total financial assets | $ | 215,665 | $ | 173,252 | $ | 42,413 | $ | — | $ | 272,885 | $ | 258,055 | $ | 14,830 | $ | — | |||||||||||||||||||||||||||||||
| Financial liabilities: | |||||||||||||||||||||||||||||||||||||||||||||||
| Contingent consideration | $ | 18,237 | $ | — | $ | — | $ | 18,237 | $ | 11,170 | $ | — | $ | — | $ | 11,170 | |||||||||||||||||||||||||||||||
| Derivative financial instruments | — | — | — | — | 1,937 | — | 1,937 | — | |||||||||||||||||||||||||||||||||||||||
| Total financial liabilities | $ | 18,237 | $ | — | $ | — | $ | 18,237 | $ | 13,107 | $ | — | $ | 1,937 | $ | 11,170 | |||||||||||||||||||||||||||||||
| Contingent consideration liability - January 1, 2022 | $ | 11,170 | |||
| Preliminary purchase price | 16,410 | ||||
| Fair value adjustments | (946) | ||||
| Accretion in value | 578 | ||||
| Amounts cancelled | (984) | ||||
| Settlement Adjustments | (505) | ||||
| Amounts paid to sellers | (7,486) | ||||
| Contingent consideration liability - September 30, 2022 | $ | 18,237 | |||
| As of September 30, 2022 | As of December 31, 2021 | ||||||||||||||||||||||
| Carrying Value | Fair Value | Carrying Value | Fair Value | ||||||||||||||||||||
| Investments | $ | 24,996 | $ | 24,998 | $ | — | $ | — | |||||||||||||||
Senior Notes(1) | 300,000 | 268,638 | 300,000 | 311,028 | |||||||||||||||||||
| Three months ended September 30, 2022 | Three months ended September 30, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Installation | Other | Eliminations | Consolidated | Installation | Other | Eliminations | Consolidated | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Revenue | $ | 672,916 | $ | 47,748 | $ | (1,550) | $ | 719,114 | $ | 504,161 | $ | 6,305 | $ | (703) | $ | 509,763 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Cost of sales (exclusive of depreciation and amortization shown separately below) | 450,017 | 37,659 | (1,116) | 486,560 | 339,308 | 4,837 | (539) | 343,606 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Segment gross profit | 222,899 | 10,089 | (434) | 232,554 | 164,853 | 1,468 | (164) | 166,157 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Depreciation and amortization | 11,277 | 10,273 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Gross profit, as reported | 221,277 | 155,884 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Selling | 31,651 | 24,188 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Administrative | 84,345 | 68,056 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Amortization | 11,370 | 9,224 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Operating income | 93,911 | 54,416 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Interest expense, net | 10,668 | 7,687 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other expense (income) | 185 | (483) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Income before income taxes | $ | 83,058 | $ | 47,212 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Three months ended September 30, 2022 | Three months ended September 30, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||
| Installation | Other | Eliminations | Consolidated | Installation | Other | Eliminations | Consolidated | ||||||||||||||||||||||||||||||||||||||||
| Segment gross profit percentage | 33.1 | % | 21.1 | % | 28.0 | % | 32.3 | % | 32.7 | % | 23.3 | % | 23.3 | % | 32.6 | % | |||||||||||||||||||||||||||||||
| Nine months ended September 30, 2022 | Nine months ended September 30, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||
| Installation | Other | Eliminations | Consolidated | Installation | Other | Eliminations | Consolidated | ||||||||||||||||||||||||||||||||||||||||
| Revenue | $ | 1,872,544 | $ | 114,690 | $ | (3,879) | $ | 1,983,355 | $ | 1,419,302 | $ | 17,182 | $ | (1,557) | $ | 1,434,927 | |||||||||||||||||||||||||||||||
| Cost of sales (exclusive of depreciation and amortization shown separately below) | 1,255,521 | 87,425 | (3,015) | 1,339,931 | 959,384 | 12,980 | (1,207) | 971,157 | |||||||||||||||||||||||||||||||||||||||
| Segment gross profit | 617,023 | 27,265 | (864) | 643,424 | 459,918 | 4,202 | (350) | 463,770 | |||||||||||||||||||||||||||||||||||||||
| Depreciation and amortization | 33,035 | 30,573 | |||||||||||||||||||||||||||||||||||||||||||||
| Gross profit, as reported | 610,389 | 433,197 | |||||||||||||||||||||||||||||||||||||||||||||
| Selling | 86,214 | 67,677 | |||||||||||||||||||||||||||||||||||||||||||||
| Administrative | 247,519 | 199,607 | |||||||||||||||||||||||||||||||||||||||||||||
| Amortization | 33,728 | 26,798 | |||||||||||||||||||||||||||||||||||||||||||||
| Operating income | 242,928 | 139,115 | |||||||||||||||||||||||||||||||||||||||||||||
| Interest expense, net | 31,669 | 22,781 | |||||||||||||||||||||||||||||||||||||||||||||
| Other expense (income) | 698 | (494) | |||||||||||||||||||||||||||||||||||||||||||||
| Income before income taxes | $ | 210,561 | $ | 116,828 | |||||||||||||||||||||||||||||||||||||||||||
| Nine months ended September 30, 2022 | Nine months ended September 30, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||
| Installation | Other | Eliminations | Consolidated | Installation | Other | Eliminations | Consolidated | ||||||||||||||||||||||||||||||||||||||||
| Segment gross profit percentage | 33.0 | % | 23.8 | % | 22.3 | % | 32.4 | % | 32.4 | % | 24.5 | % | 22.5 | % | 32.3 | % | |||||||||||||||||||||||||||||||
Risk Management Objective of Using Derivatives
We are exposed to certain risks arising from both our business operations and economic conditions. We manage exposure to a wide variety of business and operational risks through our core business activities.
INSTALLED BUILDING PRODUCTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
We manage economic risks, including interest rate, liquidity and credit risk primarily by overseeing the amount, sources and duration of debt funding and the use of derivative financial instruments. Specifically, we have entered into derivative financial instruments to manage exposure to interest rate movements that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates. Our derivative financial instruments are used to manage differences in the amount, timing and duration of our known or expected cash receipts and known or expected cash payments principally related to our investments and borrowings.
The effective portion of changes in the fair value of derivatives designated and that qualify as cash flow hedges is recorded in accumulated other comprehensive income and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. During 2017, such derivatives were used to hedge the variable cash flows associated with existing variable-rate debt. The ineffective portion of the change in fair value of the derivatives, when present, is recognized directly in earnings. During the nine months ended September 30, 2017, we did not record any hedge ineffectiveness in earnings.
Amounts reported in accumulated other comprehensive income related to derivatives will be reclassified to interest expense as interest payments are made on our variable-rate debt. Over the next twelve months, we estimate that an additional $0.5 million will be reclassified as an increase to interest expense.
Additionally, weWe do not use derivatives for trading or speculative purposes and we currently do not have any derivatives that are not designated as hedges. As of September 30, 2017, the Company has2022, we have not posted any collateral related to these agreements.
| Effective Date | Notional Amount | Fixed Rate | Maturity Date | |||||||||||||||||
| (in millions) | ||||||||||||||||||||
| July 30, 2021 | $ | 200.0 | 0.51�� | % | December 31, 2025 | |||||||||||||||
| December 31, 2021 | 100.0 | 1.37 | % | December 31, 2025 | ||||||||||||||||
| December 31, 2021 | 100.0 | 1.37 | % | December 31, 2025 | ||||||||||||||||
| December 31, 2025 | 300.0 | 3.09 | % | December 14, 2028 | ||||||||||||||||
| December 31, 2025 | 100.0 | 2.98 | % | December 14, 2028 | ||||||||||||||||
| Effective Date | Notional Amount | Fixed Rate | Maturity Date | |||||||||||||||||
| (in millions) | ||||||||||||||||||||
| July 30, 2021 | $ | 200.0 | 0.51 | % | April 15, 2030 | |||||||||||||||
| December 31, 2021 | 100.0 | 1.37 | % | December 15, 2028 | ||||||||||||||||
| December 31, 2021 | 100.0 | 1.37 | % | December 15, 2028 | ||||||||||||||||
| Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| (Benefit) expense associated with swap net settlements | $ | (1,303) | $ | 147 | $ | (344) | $ | 147 | |||||||||||||||
| Expense associated with amortization of terminated swaps | 1,127 | 812 | 2,796 | 2,412 | |||||||||||||||||||
| Three months ended September 30, | Nine months ended September 30, | |||||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||||||
| Accumulated gain/(loss) at beginning of period | $ | 28,034 | $ | (2,293) | $ | (227) | $ | (8,763) | ||||||||||||||||||
| Unrealized gains in fair value | 13,547 | 691 | 40,577 | 5,960 | ||||||||||||||||||||||
| Reclassifications of realized net losses to earnings | 832 | 601 | 2,063 | 1,802 | ||||||||||||||||||||||
| Accumulated gain/(loss) at end of period | 42,413 | (1,001) | 42,413 | (1,001) | ||||||||||||||||||||||
| Declaration Date | Record Date | Payment Date | Dividend Per Share | Amount Declared | Amount Paid | |||||||||||||||||||||||||||
| 2/24/2022 | 3/15/2022 | 3/31/2022 | $ | 0.90 | $ | 26,585 | $ | 26,242 | ||||||||||||||||||||||||
| 2/24/2022 | 3/15/2022 | 3/31/2022 | 0.315 | 9,305 | 9,184 | |||||||||||||||||||||||||||
| 5/5/2022 | 6/15/2022 | 6/30/2022 | 0.315 | 9,054 | 8,982 | |||||||||||||||||||||||||||
| 8/4/2022 | 9/15/2022 | 9/30/2022 | 0.315 | 9,018 | 8,945 | |||||||||||||||||||||||||||
| Declaration Date | Record Date | Payment Date | Dividend Per Share | Amount Declared | Amount Paid | |||||||||||||||||||||||||||
| 2/23/2021 | 3/15/2021 | 3/31/2021 | $ | 0.30 | $ | 8,907 | $ | 8,786 | ||||||||||||||||||||||||
| 5/5/2021 | 6/15/2021 | 6/30/2021 | 0.30 | 8,910 | 8,821 | |||||||||||||||||||||||||||
| 8/5/2021 | 9/15/2021 | 9/30/2021 | 0.30 | 8,912 | 8,821 | |||||||||||||||||||||||||||
INSTALLED BUILDING PRODUCTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
| September 30, 2017 | December 31, 2016 | |||||||
Included in other current liabilities | $ | 4,913 | $ | 4,595 | ||||
Included in other long-term liabilities | 8,837 | 7,052 | ||||||
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|
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| |||||
| $ | 13,750 | $ | 11,647 | |||||
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|
| |||||
| September 30, 2022 | December 31, 2021 | ||||||||||
| Included in other current liabilities | $ | 7,373 | $ | 8,048 | |||||||
| Included in other long-term liabilities | 15,644 | 13,397 | |||||||||
| $ | 23,017 | $ | 21,445 | ||||||||
| September 30, 2017 | December 31, 2016 | |||||||
Included in othernon-current assets | $ | 1,828 | $ | 1,249 | ||||
| September 30, 2022 | December 31, 2021 | ||||||||||
| Included in other non-current assets | $ | 2,302 | $ | 2,137 | |||||||
Directors
Employees – Common Stock Awards
During the nine months ended September 30, 2017, we granted approximately 0.1 million shares of our common stock under our 2014 Omnibus Incentive Plan to our employees, which vest in three equal installments (rounded to the nearest whole share) on each of April 20, 2018, April 20, 2019 and April 20, 2020. These awards have a time-based requirement but are not classified as performance-based.
During the nine months ended September 30, 2017, our employees surrendered approximately ten41 thousand shares of our common stock to satisfy tax withholding obligations arisingcertain officers, which vest in connection with the vestingtwo equal installments on each of common stock awards issued under our 2014 Omnibus Incentive Plan. Share-based compensation expense associated with common stock awards was $0.8 millionApril 20, 2023 and $1.9 million for the three and nine months ended September 30, 2017, respectively, and $0.4 million and $1.2 million for the three and nine months ended September 30, 2016, respectively. We recognized excess tax benefits of $0.6 million and $0.3 million within the income tax provision in the Condensed Consolidated Statements of Operations and Comprehensive Income forApril 20, 2024. In addition, during the nine months ended September 30, 2017 and 2016, respectively. We did not recognize any such excess tax benefits in the three months ended September 30, 2017 or 2016.
As of September 30, 2017, there was $6.2 million of unrecognized compensation expense related to these nonvested common stock awards. This expense is subject to future adjustments for forfeitures and is expected to be recognized on a straight-line basis over the remaining weighted-average period of 2.2 years. Shares forfeited are returned as treasury shares and available for future issuances. See the table below for changes in shares and related weighted average fair market value per share.
INSTALLED BUILDING PRODUCTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Employees – Performance-Based Stock Awards
During the nine months ended September 30, 2017,2022, we established, and our Boardboard of Directorsdirectors approved, performance-based targets in connection with common stock awards to be issued to certain officers in 20182023 contingent upon achievement of these targets. Share-based compensation expense associated with these
As of September 30, 2017, there was $2.4 million of unrecognized compensation expense related to nonvested performance-based commonrestricted stock awards. This expense is subject to future adjustments for forfeitures and is expectedawards to be recognized overissued to certain employees annually through 2024 contingent upon achievement of certain performance targets. These awards are accounted for as liability-based awards since they represent a predominantly-fixed monetary amount that will be settled with a variable number of common shares in the remaining weighted-average periodfirst quarter of 2.1 years using2025 and as such are included in other long-term liabilities on the graded-vesting method. See the table below for changes in shares and related weighted average fair market value per share.
Employees – Performance-Based Restricted Stock Units
Condensed Consolidated Balance Sheets. During the nine months ended September 30, 2017,2022 and 2021, we granted approximately 39 thousand and five thousand shares of our common stock, respectively, which both vested in the second quarter of 2022.
| Common Stock Awards | Performance-Based Stock Awards | Performance-Based Restricted Stock Units | |||||||||||||||||||||||||||||||||
| Awards | Weighted Average Grant Date Fair Value Per Share | Awards | Weighted Average Grant Date Fair Value Per Share | Units | Weighted Average Grant Date Fair Value Per Share | ||||||||||||||||||||||||||||||
| Nonvested awards/units at December 31, 2021 | 199,353 | $ | 68.99 | 143,401 | $ | 81.30 | 8,252 | $ | 126.89 | ||||||||||||||||||||||||||
| Granted | 109,189 | 89.32 | 54,585 | 102.98 | 16,618 | 80.55 | |||||||||||||||||||||||||||||
| Vested | (147,095) | 74.77 | (71,933) | 59.07 | (8,061) | 126.89 | |||||||||||||||||||||||||||||
| Forfeited/Cancelled | (1,057) | 81.61 | — | — | (404) | 102.46 | |||||||||||||||||||||||||||||
| Nonvested awards/units at September 30, 2022 | 160,390 | $ | 74.44 | 126,053 | $ | 103.37 | 16,405 | $ | 80.55 | ||||||||||||||||||||||||||
| Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| Common Stock Awards | $ | 1,420 | $ | 1,426 | $ | 4,718 | $ | 3,843 | |||||||||||||||
| Non-Employee Common Stock Awards | 147 | 126 | 396 | 339 | |||||||||||||||||||
| Performance-Based Stock Awards | 1,237 | 1,128 | 3,863 | 3,462 | |||||||||||||||||||
| Liability Performance-Based Stock Awards | 84 | 598 | 418 | 1,983 | |||||||||||||||||||
| Performance-Based Restricted Stock Units | 324 | 257 | 895 | 601 | |||||||||||||||||||
| $ | 3,212 | $ | 3,535 | $ | 10,290 | $ | 10,228 | ||||||||||||||||
| Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| Cost of sales | $ | 165 | $ | 161 | $ | 484 | $ | 287 | |||||||||||||||
| Selling | 126 | 56 | 329 | 145 | |||||||||||||||||||
| Administrative | 2,921 | 3,318 | 9,477 | 9,796 | |||||||||||||||||||
| $ | 3,212 | $ | 3,535 | $ | 10,290 | $ | 10,228 | ||||||||||||||||
As
| As of September 30, 2022 | |||||||||||
| Unrecognized Compensation Expense on Unvested Awards | Weighted Average Remaining Vesting Period | ||||||||||
| Common Stock Awards | $ | 7,939 | 1.8 | ||||||||
| Performance-Based Stock Awards | 6,591 | 1.7 | |||||||||
| Performance-Based Restricted Stock Units | 681 | 0.5 | |||||||||
| Total unrecognized compensation expense related to unvested awards | $ | 15,211 | |||||||||
In addition, during the three months ended September 30, 2017, we established, and our Board of Directors approved, performance-based restricted stock units in connection with common stock awards to be issued to certain employees between 2018 and 2022 contingent upon achievement of certain performance targets. These units will be accounted for as liability-based awards since they represent a predominantly-fixed monetary amount that will be settled with a variable number of common shares and as such are included in other long-term liabilities on the Condensed Consolidated Balance Sheets. Share-based compensation expense associated with these performance-based awards was $0.1 million for the three and nine months ended September 30, 2017. The unrecognized compensation expense associated with the liability-based awards is subject to fair value adjustment each reporting period, and is expected to be recognizedshown above on a straight-line basis overexcept for the remaining vesting period of 4.25 years.
INSTALLED BUILDING PRODUCTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Share-Based Compensation Summary
AmountsPerformance-Based Stock Awards which uses the graded-vesting method. Shares forfeited are returned as treasury shares and available for each category of equity-based award for employees as of December 31, 2016 and changes duringfuture issuances.
| Common Stock Awards | Performance-Based Stock Awards | Performance-Based Restricted Stock Units | ||||||||||||||||||||||
| Awards | Weighted Average Fair Market Value Per Share | Awards | Weighted Average Fair Market Value Per Share | Units | Weighted Average Fair Market Value Per Share | |||||||||||||||||||
Nonvested awards/units at December 31, 2016 | 161,174 | $ | 26.36 | — | $ | — | — | $ | — | |||||||||||||||
Granted | 101,241 | 52.00 | 77,254 | 41.00 | 73,880 | 52.00 | ||||||||||||||||||
Vested | (57,816 | ) | 26.30 | — | — | — | — | |||||||||||||||||
Forfeited/Cancelled | (1,541 | ) | 36.33 | — | — | (475 | ) | 52.00 | ||||||||||||||||
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Nonvested awards/units at September 30, 2017 | 203,058 | $ | 39.09 | 77,254 | $ | 41.00 | 73,405 | $ | 52.00 | |||||||||||||||
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2022 and 2021, our employees surrendered approximately 53 thousand and 43 thousand shares of our common stock, respectively, to satisfy tax withholding obligations arising in connection with the vesting of common stock awards issued under our 2014 Omnibus Incentive Plan. We recognized windfall tax benefits of $0.3 million and $3.0 million for the nine months ended September 30, 2022 and 2021, respectively, within the income tax provision in the Condensed Consolidated Statements of Operations and Comprehensive Income.
For the three and nine months ended September 30, 2017 and 2016, the
| Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||
Sales | $ | 2,641 | $ | 2,182 | $ | 7,363 | $ | 5,282 | ||||||||
Purchases | 302 | 114 | 901 | 370 | ||||||||||||
Rent | 290 | 163 | 875 | 472 | ||||||||||||
As of September 30, 2017 and December 31, 2016, we
| Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| Sales | $ | 6,178 | $ | 260 | $ | 7,539 | $ | 1,081 | |||||||||||||||
| Purchases | 596 | 486 | 1,460 | 1,218 | |||||||||||||||||||
| Rent | 336 | 370 | 974 | 983 | |||||||||||||||||||
INSTALLED BUILDING PRODUCTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
course of business with various related parties. M/I Homes, Inc., a customer whose Chairman, President and Chief Executive Officer is a memberand President rejoined our board of our Boarddirectors in July of Directors,2022, accounted for $1.0 million and $0.8$2.7 million of these balancesthe related party accounts receivable balance as of September 30, 20172022. Additionally, M/I Homes, Inc. accounted for $5.7 million of our related party sales during the three and December 31, 2016, respectively.
and Auto Insurance
| September 30, 2017 | December 31, 2016 | |||||||
Included in other current liabilities | $ | 2,069 | $ | 1,949 | ||||
Included in other long-term liabilities | 7,627 | 7,104 | ||||||
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| $ | 9,696 | $ | 9,053 | |||||
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| September 30, 2022 | December 31, 2021 | ||||||||||
| Included in other current liabilities | $ | 5,925 | $ | 5,889 | |||||||
| Included in other long-term liabilities | 20,691 | 16,050 | |||||||||
| $ | 26,616 | $ | 21,939 | ||||||||
| September 30, 2017 | December 31, 2016 | |||||||
Insurance receivable and indemnification asset for claims under a | $ | 2,773 | $ | 2,773 | ||||
Insurance receivable for claims that exceeded the stop loss limit | 2 | 26 | ||||||
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Total insurance receivables included in othernon-current assets | $ | 2,775 | $ | 2,799 | ||||
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| September 30, 2022 | December 31, 2021 | ||||||||||
| Insurance receivables and indemnification assets for claims under fully insured policies | $ | 3,849 | $ | 3,578 | |||||||
| Insurance receivables for claims that exceeded the stop loss limit | 492 | 278 | |||||||||
| Total insurance receivables and indemnification assets included in other non-current assets | $ | 4,341 | $ | 3,856 | |||||||
We are obligated under capital leases covering vehicles and certain equipment. The vehicle and equipment leases generally have initial terms ranging from four to six years. Total gross assets relating to capital leases were approximately $64.2 million and $64.2 million as of September 30, 2017 and December 31, 2016, respectively, and a total of approximately $23.7 million and $22.8 million were fully depreciated as of September 30, 2017 and December 31, 2016, respectively. The net book value of assets under capital leases was approximately $14.4 million and $16.4 million as of September 30, 2017 and December 31, 2016, respectively. Amortization of assets held under capital leases is included within cost of sales on the Condensed Consolidated Statements of Operations and Comprehensive Income.
We also have several noncancellable operating leases, primarily
INSTALLED BUILDING PRODUCTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Future minimumfurther information regarding our lease payments under noncancellable operating leases (with initial or remaining lease terms in excess of one year) with related parties as of September 30, 2017 are as follows (in thousands):
Remainder of 2017 | $ | 295 | ||
2018 | 988 | |||
2019 | 829 | |||
2020 | 566 | |||
2021 | 583 | |||
Thereafter | 600 |
commitments.
| Fair Value | Total | Three months ended September 30, 2017 | Nine months ended September 30, 2017 | |||||||||||||||||||||||||||||||||||||
2017 Acquisitions | Date | Acquisition Type | Cash Paid | Seller Obligations | of Common Stock Issued | Purchase Price | Revenue | Net (Loss) Income | Revenue | Net Income (Loss) | ||||||||||||||||||||||||||||||
Alpha(1) | 1/5/2017 | Share | $ | 103,810 | $ | 2,002 | $ | 10,859 | $ | 116,671 | $ | 29,334 | $ | (271 | ) | $ | 87,830 | $ | 190 | |||||||||||||||||||||
Columbia | 6/26/2017 | Asset | 8,768 | 225 | — | 8,993 | 3,026 | 73 | 3,241 | 80 | ||||||||||||||||||||||||||||||
Astro | 9/18/2017 | Asset | 8,851 | 490 | — | 9,341 | 264 | 46 | 264 | 46 | ||||||||||||||||||||||||||||||
Other | Various | Asset | 9,812 | 1,042 | — | 10,854 | 6,499 | 84 | 11,671 | 366 | ||||||||||||||||||||||||||||||
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Total | $ | 131,241 | $ | 3,759 | $ | 10,859 | $ | 145,859 | $ | 39,123 | $ | (68 | ) | $ | 103,006 | $ | 682 | |||||||||||||||||||||||
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| Three months ended September 30, 2016 | Nine months ended September 30, 2016 | |||||||||||||||||||||||||||||||||||
2016 Acquisitions | Date | Acquisition Type | Cash Paid | Seller Obligations | Total Purchase Price | Revenue | Net Income (Loss) | Revenue | Net Income (Loss) | |||||||||||||||||||||||||||
Alpine Insulation Co., Inc. | 4/12/2016 | Asset | $ | 21,151 | $ | 1,560 | $ | 22,711 | $ | 7,957 | $ | 806 | $ | 14,734 | $ | 1,238 | ||||||||||||||||||||
Other | Various | Asset | 15,276 | 1,289 | 16,565 | 5,519 | (200 | ) | 12,283 | (664 | ) | |||||||||||||||||||||||||
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Total | $ | 36,427 | $ | 2,849 | $ | 39,276 | $ | 13,476 | $ | 606 | $ | 27,017 | $ | 574 | ||||||||||||||||||||||
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year of acquisition. Net income (loss) includes amortization, taxes and interest allocations when appropriate.
| Three months ended September 30, 2022 | Nine months ended September 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2022 Acquisitions | Date | Acquisition Type | Cash Paid | Seller Obligations | Total Purchase Price | Revenue | Net Income (Loss) | Revenue | Net Income (Loss) | |||||||||||||||||||||||||||||||||||||||||||||||
| Pisgah | 03/01/2022 | Share | $ | 8,050 | $ | 1,878 | $ | 9,928 | $ | 2,847 | $ | 285 | $ | 6,665 | $ | 638 | ||||||||||||||||||||||||||||||||||||||||
| Central Aluminum | 4/11/2022 | Share | 55,150 | 22,927 | 78,077 | 13,404 | (1,048) | 26,128 | (805) | |||||||||||||||||||||||||||||||||||||||||||||||
| Tri-County | 5/23/2022 | Asset | 9,600 | 473 | 10,073 | 3,548 | (40) | 5,034 | (179) | |||||||||||||||||||||||||||||||||||||||||||||||
| Other | Various | Asset | 3,309 | 256 | 3,565 | 550 | (41) | 550 | (41) | |||||||||||||||||||||||||||||||||||||||||||||||
| $ | 76,109 | $ | 25,534 | $ | 101,643 | $ | 20,349 | $ | (844) | $ | 38,377 | $ | (387) | |||||||||||||||||||||||||||||||||||||||||||
| Three months ended September 30, 2021 | Nine months ended September 30, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2021 Acquisitions | Date | Acquisition Type | Cash Paid | Seller Obligations | Total Purchase Price | Revenue | Net Income (Loss) | Revenue | Net Income (Loss) | |||||||||||||||||||||||||||||||||||||||||||||||
| IWI | 03/01/2021 | Share | $ | 42,098 | $ | 5,959 | $ | 48,057 | $ | 10,556 | $ | 590 | $ | 24,315 | $ | 2,068 | ||||||||||||||||||||||||||||||||||||||||
| Alert | 4/13/2021 | Asset | 5,850 | 2,980 | 8,830 | 4,764 | 2 | 8,890 | 147 | |||||||||||||||||||||||||||||||||||||||||||||||
| Alpine | 4/19/2021 | Asset | 7,945 | 2,208 | 10,153 | 3,045 | 263 | 4,996 | 216 | |||||||||||||||||||||||||||||||||||||||||||||||
| GCP | 6/7/2021 | Asset | 9,700 | 1,427 | 11,127 | 2,624 | (152) | 3,270 | (118) | |||||||||||||||||||||||||||||||||||||||||||||||
| Five Star | 9/13/2021 | Share | 26,308 | 5,466 | 31,774 | 1,243 | 25 | 1,243 | 25 | |||||||||||||||||||||||||||||||||||||||||||||||
| Other | Various | Asset | 4,240 | 947 | 5,187 | 956 | (29) | 1,252 | (43) | |||||||||||||||||||||||||||||||||||||||||||||||
| $ | 96,141 | $ | 18,987 | $ | 115,128 | $ | 23,188 | $ | 699 | $ | 43,966 | $ | 2,295 | |||||||||||||||||||||||||||||||||||||||||||
| Nine months ended September 30, 2022 | |||||||||||||||||||||||||||||
| Pisgah | Central Aluminum | Tri-County | Other | Total | |||||||||||||||||||||||||
| Estimated fair values: | |||||||||||||||||||||||||||||
| Cash | $ | 87 | $ | 243 | $ | — | $ | — | $ | 330 | |||||||||||||||||||
| Accounts receivable | 772 | 3,502 | 2,823 | — | 7,097 | ||||||||||||||||||||||||
| Inventories | 684 | 14,344 | 839 | 199 | 16,066 | ||||||||||||||||||||||||
| Other current assets | 21 | 16 | 2 | — | 39 | ||||||||||||||||||||||||
| Property and equipment | 1,049 | 2,590 | 927 | 513 | 5,079 | ||||||||||||||||||||||||
| Operating lease right-of-use asset | — | 844 | 66 | — | 910 | ||||||||||||||||||||||||
| Intangibles | 4,634 | 34,900 | 3,488 | 1,378 | 44,400 | ||||||||||||||||||||||||
| Goodwill | 2,743 | 27,595 | 2,123 | 1,523 | 33,984 | ||||||||||||||||||||||||
| Other non-current assets | 7 | — | 12 | 37 | 56 | ||||||||||||||||||||||||
| Accounts payable and other current liabilities | (69) | (5,388) | (185) | (85) | (5,727) | ||||||||||||||||||||||||
| Other long-term liabilities | — | (569) | (22) | — | (591) | ||||||||||||||||||||||||
| Fair value of assets acquired and purchase price | 9,928 | 78,077 | 10,073 | 3,565 | 101,643 | ||||||||||||||||||||||||
| Less seller obligations | 1,878 | 22,927 | 473 | 256 | 25,534 | ||||||||||||||||||||||||
| Cash paid | $ | 8,050 | $ | 55,150 | $ | 9,600 | $ | 3,309 | $ | 76,109 | |||||||||||||||||||
| Nine months ended September 30, 2021 | ||||||||||||||||||||||||||||||||||||||||||||
| IWI | Alert | Alpine | GCP | Five Star | Other | Total | ||||||||||||||||||||||||||||||||||||||
| Estimated fair values: | ||||||||||||||||||||||||||||||||||||||||||||
| Cash | $ | 168 | $ | — | $ | — | $ | — | $ | 1,472 | $ | — | $ | 1,640 | ||||||||||||||||||||||||||||||
| Accounts receivable | 5,122 | 4,710 | — | 3,067 | 4,583 | 482 | 17,964 | |||||||||||||||||||||||||||||||||||||
| Inventories | 1,157 | 765 | 359 | — | 1,399 | 138 | 3,818 | |||||||||||||||||||||||||||||||||||||
| Other current assets | 3,014 | 738 | — | — | 330 | — | 4,082 | |||||||||||||||||||||||||||||||||||||
| Property and equipment | 796 | 693 | 726 | 206 | 1,161 | 544 | 4,126 | |||||||||||||||||||||||||||||||||||||
| Intangibles | 25,200 | 2,770 | 5,543 | 5,670 | 17,400 | 2,787 | 59,370 | |||||||||||||||||||||||||||||||||||||
| Goodwill | 23,282 | 940 | 3,582 | 2,695 | 6,626 | 1,253 | 38,378 | |||||||||||||||||||||||||||||||||||||
| Other non-current assets | 264 | 132 | — | — | 6 | 402 | ||||||||||||||||||||||||||||||||||||||
| Accounts payable and other current liabilities | (8,416) | (1,184) | (57) | (493) | (1,170) | (20) | (11,340) | |||||||||||||||||||||||||||||||||||||
| Other long-term liabilities | (2,530) | (734) | — | (18) | (27) | (3) | (3,312) | |||||||||||||||||||||||||||||||||||||
| Fair value of assets acquired and purchase price | 48,057 | 8,830 | 10,153 | 11,127 | 31,774 | 5,187 | 115,128 | |||||||||||||||||||||||||||||||||||||
| Less seller obligations | 5,959 | 2,980 | 2,208 | 1,427 | 5,466 | 947 | 18,987 | |||||||||||||||||||||||||||||||||||||
| Cash paid | $ | 42,098 | $ | 5,850 | $ | 7,945 | $ | 9,700 | $ | 26,308 | $ | 4,240 | $ | 96,141 | ||||||||||||||||||||||||||||||
| 2017 | 2016 | |||||||||||||||||||||||||||||||
| Alpha | Columbia | Astro | Other | Total | Alpine | Other | Total | |||||||||||||||||||||||||
Estimated fair values: | ||||||||||||||||||||||||||||||||
Cash | $ | 247 | $ | — | $ | — | $ | — | $ | 247 | $ | — | $ | — | $ | — | ||||||||||||||||
Accounts receivable | 30,361 | 990 | 924 | 2,137 | 34,412 | 3,959 | 2,080 | 6,039 | ||||||||||||||||||||||||
Inventories | 1,851 | 704 | 296 | 1,014 | 3,865 | 700 | 888 | 1,588 | ||||||||||||||||||||||||
Other current assets | 4,827 | 8 | 36 | 8 | 4,879 | — | 12 | 12 | ||||||||||||||||||||||||
Property and equipment | 1,528 | 659 | 640 | 1,144 | 3,971 | 656 | 1,188 | 1,844 | ||||||||||||||||||||||||
Intangibles | 57,100 | 4,760 | 4,966 | 5,939 | 72,765 | 12,800 | 8,492 | 21,292 | ||||||||||||||||||||||||
Goodwill | 38,679 | 2,211 | 2,808 | 2,361 | 46,059 | 6,642 | 5,270 | 11,912 | ||||||||||||||||||||||||
Othernon-current assets | 150 | 31 | — | 191 | 372 | — | 94 | 94 | ||||||||||||||||||||||||
Accounts payable and other current liabilities | (18,072 | ) | (370 | ) | (329 | ) | (1,940 | ) | (20,711 | ) | (2,046 | ) | (1,459 | ) | (3,505 | ) | ||||||||||||||||
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Fair value of assets acquired and purchase price | 116,671 | 8,993 | 9,341 | 10,854 | 145,859 | 22,711 | 16,565 | 39,276 | ||||||||||||||||||||||||
Less fair value of common stock issued | 10,859 | — | — | — | 10,859 | — | — | — | ||||||||||||||||||||||||
Less seller obligations | 2,002 | 225 | 490 | 1,042 | 3,759 | 1,560 | 1,289 | 2,849 | ||||||||||||||||||||||||
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Cash paid | $ | 103,810 | $ | 8,768 | $ | 8,851 | $ | 9,812 | $ | 131,241 | $ | 21,151 | $ | 15,276 | $ | 36,427 | ||||||||||||||||
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and/or non-compete agreements and amounts based on working capital calculations. When these payments are expected to be made over one year from the acquisition date, the contingent consideration is discounted to net present value of future payments based on a weighted average of various future forecast scenarios.
The provisional amounts for Alpha originally reported in our Condensed Consolidated Balance Sheets included in our Quarterly Report on Form10-Q for the period ended March 31, 2017 were adjusted to reflect the review and ongoing analysis of the fair value measurements. As a result of our continued evaluation during the measurement period, we increased goodwill by approximately $2.2 million, offset by a corresponding net reduction in various working capital accounts.
The provisional amounts for Columbia originally reported in our Condensed Consolidated Balance Sheets included in our Quarterly Report on Form10-Q for the period ended June 30, 2017 were adjusted to reflect the review and ongoing analysis of the fair value measurements. As a result of an independent appraisal, we increased goodwill by approximately $0.5 million and our seller obligations by approximately $0.4 million for an adjustment to the fair value of a working capital contingent liability. These adjustments, as well as various other insignificant adjustments, resulted in a total purchase price increase for Columbia of approximately $0.6 million as reflected within the above table and were within applicable measurement period guidelines.
INSTALLED BUILDING PRODUCTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Installation operating segment.
| 2017 | 2016 | |||||||||||||||
Acquired intangibles assets | Estimated Fair Value | Weighted Average Estimated Useful Life (yrs.) | Estimated Fair Value | Weighted Average Estimated Useful Life (yrs.) | ||||||||||||
Customer relationships | $ | 37,533 | 8 | $ | 12,862 | 9 | ||||||||||
Trademarks and trade names | 19,403 | 15 | 6,116 | 15 | ||||||||||||
Non-competition agreements | 2,429 | 5 | 2,315 | 5 | ||||||||||||
Backlog | 13,400 | 1.5 | — | — | ||||||||||||
| For the nine months ended September 30, | |||||||||||||||||||||||
| 2022 | 2021 | ||||||||||||||||||||||
| Acquired intangibles assets | Estimated Fair Value | Weighted Average Estimated Useful Life (yrs.) | Estimated Fair Value | Weighted Average Estimated Useful Life (yrs.) | |||||||||||||||||||
| Customer relationships | $ | 29,606 | 12 | $ | 43,115 | 12 | |||||||||||||||||
| Trademarks and tradenames | 13,228 | 15 | 10,147 | 15 | |||||||||||||||||||
| Non-competition agreements | 1,566 | 5 | 4,530 | 5 | |||||||||||||||||||
| Backlog | — | 0 | 1,578 | 1.5 | |||||||||||||||||||
| Pro forma for the three months ended September 30, | Pro forma for the nine months ended September 30, | |||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||
Net revenue | $ | 297,820 | $ | 272,010 | $ | 853,897 | $ | 771,313 | ||||||||
Net income | 11,836 | 12,328 | 31,544 | 32,117 | ||||||||||||
Basic net income per share | 0.37 | 0.39 | 1.00 | 1.02 | ||||||||||||
Diluted net income per share | 0.37 | 0.39 | 0.99 | 1.02 | ||||||||||||
| Unaudited pro forma for the three months ended September 30, | Unaudited pro forma for the nine months ended September 30, | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net revenue | $ | 720,502 | $ | 564,387 | $ | 2,007,475 | $ | 1,603,585 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Net income | 60,983 | 38,803 | 154,732 | 100,564 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Basic net income per share | 2.14 | 1.32 | 5.36 | 3.43 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Diluted net income per share | 2.13 | 1.31 | 5.33 | 3.40 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| For the three months ended September 30, | For the nine months ended September 30, | |||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||
Net income - basic and diluted | $ | 12,010 | $ | 11,549 | $ | 30,347 | $ | 27,355 | ||||||||
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Weighted average number of common shares outstanding | 31,659,503 | 31,323,600 | 31,632,400 | 31,294,596 | ||||||||||||
Dilutive effect of outstanding common stock awards after application of the Treasury Stock Method | 107,378 | 54,190 | 80,115 | 57,395 | ||||||||||||
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Diluted shares outstanding | 31,766,881 | 31,377,790 | 31,712,515 | 31,351,991 | ||||||||||||
Basic and diluted net income per share | $ | 0.38 | $ | 0.37 | $ | 0.96 | $ | 0.87 | ||||||||
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NoneThe dilutive effect of thenon-vested commonoutstanding restricted stock awards had an antidilutive effect on diluted net income per share for eitherafter application of the treasury stock method was approximately 117 thousand and 169 thousand shares for the three orand nine months ended September 30, 20172022, respectively and 2016.
On October 30, 2017, we acquired substantially all
31.5 cents per share.
94% of our net revenue comes from the service-based installation of these products across all of our end markets and forms our Installation operating segment and single reportable segment. Additionally, we manufacture and distribute certain building products and materials to installers and distributors involved with various types of construction projects and these two operations form our Manufacturing operating segment and our Distribution operating segment, respectively. We believe our business is well positioned to continue to profitably grow over the long-term due to our strong balance sheet, liquidity and our continuing acquisition strategy. See “Key Factors Affecting Our Operating Results, COVID-19 Impacts” below for a discussion of short-term impacts to our business. 2021. remainder of 2022 and into 2023, we will continue to work with our suppliers to lessen the impact on our margins and with our customers to offset further cost increases through selling price adjustments. were as follows (in thousands): sales. equity vesting. was as follows (in thousands): market's expectations for higher interest rates in the future relative to our three existing interest rate swaps and our two forward interest rate swaps. We also amortized $1.1 million and $2.8 million of our remaining unrealized gains and losses, net, on our terminated cash flow hedges to interest expense during the three and nine months ended September 30, 2022, respectively, not including the offsetting tax effects of $(0.3) million and $(0.7) million, respectively. During the nine months ended September 30, materials that we install directly from manufacturers, and the products we sell are either purchased from manufacturers or other suppliers or are manufactured by us. Since the beginning of the COVID-19 pandemic, the industry supply of many of the materials we install has been disrupted. The higher demand for materials coupled with supply chain issues including raw material shortages, supplier labor shortages, bottlenecks and shipping constraints has forced us to buy some materials at higher prices through distributors and local retailers to meet customer demand, therefore reducing gross profit. The pandemic has also resulted in the need for some of our manufacturers to allocate materials across the industry which has affected the pricing and availability of those materials. We expect the supply chain disruptions affecting most of the materials used throughout our installation work to continue throughout 2022 and into 2023. We will continue to prioritize the effective management of our supply chain by our purchasing, logistics and warehousing teams. COVID-19 pandemic. facility (as defined below). collateral agent thereunder. The amended Term Loan amortizes in quarterly principal payments of the Term Loan and for general corporate purposes, including acquisitions and other growth initiatives. As of September 30, 2022, we had $490.2 million, net of unamortized debt issuance costs, due on our Term Loan. Notes. (in thousands) Long-term debt obligations (2) Capital lease obligations (3) Operating lease obligations (4)20162021 Form10-K.mirrors,other products throughout the United States. Our acquisition of Alpha in January 2017 expanded our market position in commercial insulation installation and strengthens our complementary installed product offerings in waterproofing, fire-stopping and fireproofing. We offer our portfolio of services for new and existing single-family and multi-family residential and commercial building projects in all 48 continental states and the District of Columbia from our national network of over 220 branch locations.We believe our business is well positioned to continue to profitably grow during The strategic acquisitions of multiple companies over the housing recovery duelast several years contributed meaningfully to our strong balance sheet, liquidity and continuing acquisition strategy. We may adjust our strategies based on housing demand and our performance41.1% increase in each of our markets. Nevertheless, the pace of the housing recovery and our future results could be negatively affected by weakening economic conditions and decreases in housing demand and affordability as well as increases in interest rates and tightening of mortgage lending practices.We manage all aspects of the installation process for our customers, from our direct purchase and receipt of materials from national manufacturers, to our timely supply of materials to job sites and quality installation. Installation of insulation is a critical phase in the construction process, as certain interior work cannot begin until the insulation phase passes inspection. We benefit from our national scale, long-standing supplier relationships and a broad customer base that includes production and custom homebuilders, multi-family and commercial construction firms and homeowners.Contracts fulfilled by Alpha are primarily accounted for under thepercentage-of-completion method of accounting. When thepercentage-of-completion method is used, we estimate the costs to complete individual contracts and record asnet revenue that portion of the total contract price that is considered complete based on the relationship of costs incurred to date to total anticipated costs. The costs of earned revenue include all direct material and labor costs and those indirect costs related to contract performance, such as indirect labor, supplies, tools and repairs. As a result of the acquisition of Alpha, we currently estimate backlog to be $81.4 million as of September 30, 2017. Backlog represents expected revenue on uncompleted contracts, including the amount of revenue on contracts for which our work has not yet commenced, less the revenue recognized under these contracts.As a result of Hurricanes Harvey and Irma, we closed our locations in Texas and Florida during and in the days immediately following the storms.This negatively impacted our revenue and gross profit for the three months ended September 30, 2017.Three Months Ended September 30, 2017 Compared2022 compared to the Three Months Ended September 30, 2016For increased 41.1%, or $209.4 million to $719.1 million, while gross profit increased 41.9% to $221.3 million during the three months ended September 30, 2017,2022 compared to 2021. The increase in net revenue and gross profit was primarily driven by selling price increases, higher volume of customer jobs completed, and the contribution of our recent acquisitions. We continue to make pricing adjustments to offset the current macroeconomic inflationary trends as evidenced by the 27.1% increase in our price/mix metric. Sales volume increased by 7.5% on a same branch basis. Gross profit margin grew primarily due to higher selling prices and resulting leverage gained on labor and other costs of sales, partially offset by higher material costs caused by supply chain constraints and higher fuel costs. Inflationary pressures continue to contribute to higher material costs, particularly for spray foam and several complementary installed products, as some products continue to be difficult to source near volume and pricing levels secured in prior periods. Certain net revenue and industry metrics we use to monitor our operations are discussed in the "Key Measures of Performance" section below, and further details regarding results of our various end markets are discussed further in the "Net Revenue, Cost of Sales and Gross Profit" section below.Three months ended September 30, Nine months ended September 30, 2022 2021 2022 2021 Period-over-period Growth Consolidated Sales Growth 41.1 % 21.2 % 38.2 % 18.4 % 28.5 % 11.2 % 26.2 % 8.9 % 33.5 % 21.3 % 31.9 % 18.2 % 28.4 % 11.2 % 26.2 % 8.6 % 39.2 % 24.1 % 38.2 % 20.1 % 35.3 % 16.0 % 32.8 % 12.8 % 33.9 % 18.2 % 29.7 % 17.0 % 32.9 % 10.9 % 28.9 % 7.0 % 38.4 % 23.2 % 36.8 % 19.6 % 34.9 % 15.1 % 32.1 % 11.8 % 16.0 % 17.5 % 14.4 % 12.1 % 2.8 % (0.2) % 4.4 % (5.0) % 657.3 % 23.0 % 567.5 % 44.0 % 44.3 % 23.0 % 43.8 % 44.0 % 7.5 % 4.7 % 7.9 % 10.4 % 27.1 % 7.4 % 22.2 % (0.3) % Total Completions Growth 6.5 % (2.1) % 2.3 % 5.9 % 8.1 % 1.5 % 5.4 % 6.9 % 5.6 % (9.6) % (5.3) % 4.3 % (1) Same-branch basis represents period-over-period growth for branch locations owned greater than 12 months as of each financial statement date. (2) Prior period disclosures have been recast to conform to the current period segment presentation. (3) Calculated based on period-over-period growth of all end markets for our Installation segment. (4) Calculated based on period-over-period growth in the single-family subset of the residential new construction end market for our Installation segment. (5) Calculated based on period-over-period growth in the multi-family subset of the residential new construction end market for our Installation segment. (6) Calculated based on period-over-period growth in the residential new construction end market for our Installation segment. (7) Calculated based on period-over-period growth in the total commercial end market for our Installation segment. Our commercial end market consists of heavy and light commercial projects. (8) Calculated based on period-over-period growth in our Other category which consists of our Manufacturing and Distribution operating segments. Our distribution businesses were acquired in December, 2021 and April, 2022. (9) The heavy commercial end market, a subset of our total commercial end market, comprises projects that are much larger than our average installation job. This end market is excluded from the volume growth and price/mix growth calculations as to not skew the growth rates given its much larger per-job revenue compared to the average jobs in our remaining end markets. (10) Calculated as period-over-period change in the number of completed same-branch jobs within our Installation segment for all markets we serve except the heavy commercial end market. (11) Defined as change in the mix of products sold and related pricing changes and calculated as the change in period-over-period average selling price per same-branch jobs within our Installation segment for all markets we serve except the heavy commercial market, multiplied by total current year jobs. The mix of end customer and product would have an impact on the year-over-year price per job. (12) U.S. Census Bureau data, as revised. Three months ended September 30, Nine months ended September 30, 2022 Change 2021 2022 Change 2021 Net revenue $ 719,114 41.1 % $ 509,763 $ 1,983,355 38.2 % $ 1,434,927 Cost of sales 497,837 40.7 % 353,879 1,372,966 37.1 % 1,001,730 Gross profit $ 221,277 41.9 % $ 155,884 $ 610,389 40.9 % $ 433,197 Gross profit percentage 30.8 % 30.6 % 30.8 % 30.2 % $69.8during the three and nine months ended September 30, 2022 primarily due to increased selling prices and organic growth from our existing branches as evidenced by the volume and price/mix metrics shown in the Key Measures of Performance section above. During the three and nine months ended September 30, 2022, we experienced growth in all of our end markets and we achieved 28.5% and 26.2% year-over-year same branch sales growth, respectively. Installation revenue increased 33.5% and 31.9% for the three and nine months ended September 30, 2022, respectively, driven by strong growth in the residential new construction, repair and remodel, and commercial markets. Our largest end market, the single-family subset of the residential new construction market, grew revenue 39.2% and 38.2%, respectively, over the same periods ended September 30, 2021. The vast majority of the growth in this end market was organic, attributable to price gains and more favorable customer and product mix with the remainder attributable to growth in the number of completed jobs. In our commercial end market, continued challenges associated with the COVID-19 pandemic had an impact, as evidenced by modest increases of 2.8% and 4.4% in same branch sales within this end market during the three and nine months ended September 30, 2022, respectively. See “Key Factors Affecting Our Operating Results, COVID-19 Impacts” below for further information. The remaining overall growth in net revenue for both the three and nine months ended September 30, 2022 is attributable to the recent acquisitions of AMD Distribution and Central Aluminum which form our Distribution operating segment. This operating segment, combined with our Manufacturing operating segment, grew from $6.3 million or 31.0%, to $295.2 million from $225.4$47.7 million for the three months ended September 30, 2016. The increase in net revenue included revenue2022 and from acquisitions of approximately $48.7 million. Approximately $8.3$17.2 million was predominantly attributable to organic growth in$114.7 million for the volume of completed jobs in all of our end markets. The remaining increase in net revenue of $12.8 million resulted from a variety of factors, including customer and product mix, market pricing variations and insulation volumes driven by building code requirements. None of these additional factors was more significant than any other. Partially offsetting the increase in revenue were the effects of Hurricanes Harvey and Irma that negatively impacted our productivity during the threenine months ended September 30, 2017.Cost of salesFor the three months ended September 30, 2017, cost of sales increased $51.5 million, or 32.6%, to $209.6 million from $158.1 million for the three months ended September 30, 2016. As a percentage of net revenue, cost of sales increased to 71.0% during the three months ended September 30, 2017 from 70.2% during the three months ended September 30, 2016. On a dollar basis, cost of sales included increases from acquired businesses of approximately $34.8 million. Approximately $5.5 million was predominantly attributable to organic growth in the volume of completed jobs in the residential new construction end market. Additionally, cost of sales increased $11.2 million as a result of a variety of factors including customer and product mix, market pricing variations and insulation volumes driven by building code requirements, as well as expense associated with our recently introduced share-based compensation program for certain of our installers. None of these additional factors was more significant than any other.Gross ProfitFor the three months ended September 30, 2017, gross profit increased $18.3 million to $85.6 million from $67.3 million for the three months ended September 30, 2016. 2022.decreased to 29.0% forimproved during the three and nine months ended September 30, 20172022 compared to the corresponding prior year periods primarily on the strength of sales growth across all end markets as well as strong price/mix growth. However, ongoing industry wide supply chain issues continue to impact our operating efficiency, driving our material costs higher. In order to meet customer demand during the quarter, we purchased materials from 29.8% fordistributors and home centers at a premium to what we typically would purchase directly from manufacturers. During the three and nine months ended September 30, 2016 due2022, we estimate these purchases increased materials expense by approximately $1.2 million and $3.6 million, respectively, therefore reducing gross profit by approximately 20 basis points for both periods. While inflation and material supply chain issues are likely to persist throughout the factors discussed above. Three months ended September 30, Nine months ended September 30, 2022 Change 2021 2022 Change 2021 Selling $ 31,651 30.9 % $ 24,188 $ 86,214 27.4 % $ 67,677 Percentage of total net revenue 4.4 % 4.7 % 4.3 % 4.7 % Administrative $ 84,345 23.9 % $ 68,056 $ 247,519 24.0 % $ 199,607 Percentage of total net revenue 11.7 % 13.4 % 12.5 % 13.9 % Amortization $ 11,370 23.3 % $ 9,224 $ 33,728 25.9 % $ 26,798 Percentage of total net revenue 1.6 % 1.8 % 1.7 % 1.9 % For2017,2022 was primarily driven by an increase in selling expenseswages and commissions to support our increased $1.9 million, or 14.1%, to $14.9 million from $13.0 millionnet revenue of 41.1%. Selling expense as a percentage of sales decreased for the three and nine months ended September 30, 2016. As a percentage of net revenue,2022 compared to 2021 primarily due to increased leverage on selling wages from increased sales.decreased to 5.0% duringfor the three and nine months ended September 30, 20172022 was primarily due to an increase in wages and benefits, insurance and facility costs from 5.8% duringacquisitions and to support organic growth. Administrative expenses decreased as a percentage of sales for the three and nine months ended September 30, 2016. On a dollar basis, the increase in selling expenses was2022 compared to 2021 primarily due to higher wages, benefitsthe leverage gained on administrative employee expenses and commissions which supported both organic and acquisition-related growth.AdministrativeFor the three months ended September 30, 2017, administrative expenses increased $10.2 million, or 32.2%, to $41.7 million from $31.5 million for the three months ended September 30, 2016. The increase in administrative expenses is generally related to the cost of completing acquisitions, the ongoing costs associated with these newly-acquired entities and costs to support our growth. Wages and benefits increased $6.7 million, of which $4.0 million was attributable to acquisitions and $2.7 million was to support our growth. In addition, facility costs from increased $1.2 million to support both organic and acquisition related growth and accounting, legal and consulting fees increased $0.5 million primarily to facilitate our transition into large accelerated filer status. The remaining increase in administrative expenses of $1.8 million included individually minor increases in several categories necessary to support our growing business, such as supplies and information technology costs.For the three months ended September 30, 2017, amortization expense increased $3.9 million to $6.8 million from $2.9 million for the three months ended September 30, 2016. additionalincrease in finite-lived intangible assets recorded as a result of acquisitions.For net was as follows (in thousands):Three months ended September 30, Nine months ended September 30, 2022 Change 2021 2022 Change 2021 Interest expense, net $ 10,668 38.8 % $ 7,687 $ 31,669 39.0 % $ 22,781 Other expense (income) 185 138.3 % (483) 698 241.3 % (494) Total other expense, net $ 10,853 $ 7,204 $ 32,367 $ 22,287 2017, other expense increased $2.9 million2022 compared to $4.5 million from $1.6 million2021 was primarily due to the increase in debt levels. See Note 7, Long-Term Debt, for more information.Three months ended September 30, Nine months ended September 30, 2022 2021 2022 2021 Income tax provision $ 22,080 $ 12,320 $ 55,857 $ 27,432 Effective tax rate 26.6 % 26.1 % 26.5 % 23.5 % 20162022, our effective tax rates were 26.6% and 26.5%, respectively. The rates for both periods were favorably impacted by recognition of a windfall tax benefit from equity vesting. Each rate for the three and nine months ended September 30, 2021 was also favorably impacted by recognition of a windfall tax benefit due to increased interest expense on our new Term Loan to support our growth related to acquisitions.provisionThree months ended September 30, Nine months ended September 30, 2022 2021 2022 2021 Net change on cash flow hedges, net of taxes $ 14,379 $ 1,292 $ 42,640 $ 7,762 2017,2022, we amended the maturity dates for our three existing interest rate swaps. These swaps had unrealized gains of $51.2 million at the amendment date of July 8, 2022. These unrealized gains will be amortized as a decrease to interest expense, net through the original maturity date of April 2030. See Note 11, Derivatives and Hedging Activities, for more information.an income tax provisionunrealized gains of $5.7$13.5 million and $40.6 million, net of taxes, respectively, on our income before income taxes of $17.7 million, or an effective tax rate of 32.3%. This rate was favorably impacted by deductions related to domestic production activities, usage of net operating losses for a tax filing entity which previously had a full valuation allowance, excess tax benefits from share-based compensation arrangements and the statute expiring for various uncertain tax positions. The favorable impact was partially offset by the tax effect of losses incurred by separate companies to which no benefit can be recognizedcash flow hedges due to a full valuation allowance against the losses.2016,2021, we recorded an incomeunrealized gain of $0.7 million, net of tax, provisionand amortized $0.8 million of $6.7 millionour remaining unrealized loss on our income before income taxesterminated cash flow hedges, not including the offsetting tax effect of $18.3 million, or an effective tax rate of 36.8%. This rate was favorably impacted by deductions related to domestic production activities and the release of a valuation allowance due to utilization of net operating losses. The favorable impact was partially offset by separate tax filing entities in a loss position for which a full valuation allowance will be accounted for against the losses, causing no tax benefit to be recognized on the losses.Nine Months Ended September 30, 2017 Compared to the Nine Months Ended September 30, 2016Net revenueFor the nine months ended September 30, 2017, net revenue increased $204.1 million, or 32.4%, to $833.1 million from $629.0 million for the nine months ended September 30, 2016. The increase in net revenue included revenue from acquisitions of approximately $141.8$(0.2) million. Approximately $35.8 million was predominantly attributable to organic growth in the volume of completed jobs in all of our end markets. The remaining increase in net revenue of $26.5 million resulted from a variety of factors, including customer and product mix, market pricing variations and insulation volumes driven by building code requirements. None of these additional factors was more significant than any other. Partially offsetting the increase in revenue were the effects of Hurricanes Harvey and Irma that negatively impacted our productivity during the nine months ended September 30, 2017.Cost of salesFor the nine months ended September 30, 2017, cost of sales increased $145.5 million, or 32.7%, to $590.4 million from $444.9 million for the nine months ended September 30, 2016. As a percentage of net revenue, cost of sales increased to 70.9% during the nine months ended September 30, 2017 from 70.7% during the nine months ended September 30, 2016. On a dollar basis, cost of sales included increases from acquired businesses of approximately $100.2 million. Approximately $24.4 million was predominantly attributable to organic growth in the volume of completed jobs in the residential new construction end market. Additionally, cost of sales increased $20.9 million as a result of a variety of factors including customer and product mix, market pricing variations and insulation volumes driven by building code requirements, as well as expense associated with our recently introduced share-based compensation program for certain of our installers. None of these additional factors was more significant than any other.Gross ProfitFor the nine months ended September 30, 2017, gross profit increased $58.6 million to $242.7 million from $184.1 million for the nine months ended September 30, 2016. As a percentage of net revenue, gross profit decreased to 29.1% for the nine months ended September 30, 2017 from 29.3% for the nine months ended September 30, 2016 due to the factors discussed above.Operating expensesSellingFor the nine months ended September 30, 2017, selling expenses increased $6.3 million, or 17.4%, to $42.5 million from $36.2 million for the nine months ended September 30, 2016. As a percentage of net revenue, selling expenses decreased to 5.1% during the nine months ended September 30, 2017 from 5.8% during the nine months ended September 30, 2016. On a dollar basis, the increase in selling expenses was primarily due to higher wages, benefits and commissions of $5.8 million which supported both organic and acquisition-related growth. The remaining increase of $0.5 million included individually minor increases in several categories necessary to support our growing business.AdministrativeFor the nine months ended September 30, 2017, administrative expenses increased $30.0 million, or 32.4%, to $122.7 million from $92.7 million for the nine months ended September 30, 2016. The increase in administrative expenses is generally related to the cost of completing acquisitions, the ongoing costs associated with these newly-acquired entities and costs to support our growth. Wages and benefits increased $18.9 million, of which $11.8 million was attributable to acquisitions and $7.1 million was to support our growth. In addition, facility costs increased $3.7 million to support both organic and acquisition-related growth and accounting, legal and consulting fees increased $2.3 million primarily to facilitate our transition into accelerated filer status. We also incurred $1.1 million of increased general liability insurance costs due to claims development and to support growth and $0.9 million of increased information technology-related expenses. The remaining increase in administrative expenses of $3.1 million included individually minor increases in several categories necessary to support our growing business.AmortizationFor the nine months ended September 30, 2017, amortization expense increased $11.6 million to $19.8 million from $8.2 million for the nine months ended September 30, 2016. The increase in amortization expense was attributable to the additional finite-lived intangible assets recorded as a result of acquisitions.Other expenseFor the nine months ended September 30, 2017, other expense increased $6.9 million to $11.8 million from $4.9 million for the nine months ended September 30, 2016 due to increased interest expense on higher debt levels to support our growth related to acquisitions.Income tax provision2017,2021, we recorded an incomeunrealized gain of $6.0 million, net of tax, provisionand amortized $2.4 million of $15.5 millionour remaining unrealized loss on our income before income taxes of $45.8 million, or an effective tax rate of 33.8%. This rate was favorably impacted by deductions related to domestic production activities, usage of net operating losses for a tax filing entity which previously had a full valuation allowance, excess tax benefits from share-based compensation arrangements andterminated cash flow hedges, not including the statute expiring for various uncertain tax positions. The favorable impact was partially offset by theoffsetting tax effect of losses incurred by separate companies$(0.6) million.which no benefit can be recognizedmoderate and stabilize inflation as it has raised the federal funds rate multiple times in 2022 and has signaled plans to continue raising this rate throughout 2022 and into 2023. This caused the average mortgage rate in the United States to almost double since the end of 2021. Rising interest rates began to curtail housing demand in the second and third quarters of 2022, reducing mortgage financing affordability. While we believe the demand for our installation services remains high due to the large residential construction backlog of both units under construction and units not started, we are closely watching our residential markets for signs of a full valuation allowance onslowdown in demand that could result from these risks.losses.2016,2022, we recorded an incomesaw increased pricing for certain insulation materials as well as many of the other products we install and expect manufacturers to seek additional price increases during the year. The increase in demand, inflationary pressures, product shortages and other supply constraints caused these material price increases to be larger and more frequent than in a normal business cycle. Increased market pricing, regardless of the catalyst, has and could continue to impact our results of operations throughout the remainder of 2022, to the extent that price increases cannot be passed on to our customers. We will continue to work with our customers to adjust selling prices to offset higher costs as they occur. See “COVID-19 Impacts” below for a discussion of the short-term impacts of the current economic climate on the availability of the materials we install.approximately $14.8the employer portion of Social Security taxes by deferring $20.7 million of payments in 2020. 50% of the amount was paid on our income before income taxes of approximately $42.1 million, or an effective tax rate of 35.1%. This rate was favorably impacted by deductions related to domestic production activities, the early adoption of ASU2016-09December 31, 2021 and the release of a valuation allowance due to utilization of net operating losses. The favorable impact was partially offset by separate tax filing entities in a loss position for which a full valuation allowanceremaining 50% will be accounted for againstpaid on December 31, 2022. It is important to note that this does not impact the losses, causing no tax benefittiming of the expense, only the timing of the payment.be recognized on the losses.Liquidity and Capital ResourcesOur primary sources$250.0 million under our asset-based lending credit facility (as defined below), less $52.4 million of outstanding letters of credit, resulting in total liquidity areof $426.0 million. This total liquidity was reduced by $4.3 million within our cash and cash equivalents due to a deposit into a trust to serve as additional collateral for our marketable securitiesworkers' compensation, general liability and auto policies. This amount can be converted to a letter of credit at our discretion and would reduce the availability of our asset-based lending facility (as defined below). Liquidity may also be limited in the future by certain cash collateral limitations under our asset-based credit facility (as defined below), depending on the status of our borrowing base availability.cash generated byfirst three quarters of 2022 and expect manufacturers to seek additional price increases in the remainder of 2022 and into 2023. Increased market pricing on the materials we purchase has and could continue to impact our operations. Asresults of September 30, 2017operations in 2022 due to the higher prices we must pay for materials. See Part I, Item 1A, Risk Factors on the 2021 Form 10-K, for information on the potential and December 31, 2016, we had $92.1 millioncurrently known impacts on our business and $14.5 million, respectively, in cash, cash equivalents and marketable securities. Our marketable securities consist primarily of commercial paper, corporate bonds and money market funds. Our investment policy requiresliquidity from the purchase of high grade investment securities and the diversification of asset types and includes certain limits to avoid over-concentration into specific maturities, a specific issuer or a specific class of securities. As of September 30, 2017, we are in compliance with our investment policy. As of September 30, 2017, the financial sector accounted for 100% of our total investment portfolio.andto meet required principal and interest obligations and to make required income tax payments. Our capitalWe may also use our resources primarily consistto fund our optional stock repurchase program and pay quarterly and annual dividends. In addition, we expect to spend cash and cash equivalents to acquire various companies with at least $100.0 million in aggregate net revenue acquired each fiscal year. The amount of cash paid for an acquisition is dependent on various factors, including the size and determined value of the business being acquired.agreements and capital equipment leases and loans.Since 2012, when housing completions began to increase meaningfully after a previous significant downturn in the residential construction industry, we have experienced improved profitability and liquidity and invested significantly in acquisitions, supported by our cash from operations and our credit agreements. Additionally, we have utilized capital leases and loans to finance the increase in the number of our vehicles and equipment.In addition, our acquisition of Alpha, which was completed on January 5, 2017, requires us to commit significant resources to the acquisition and ongoing support of Alpha’s business. This acquisition was funded by drawing on our previous credit facility. As of September 30, 2017, we had no outstanding borrowings under our ABL Revolver and our borrowing availability was $82.1 million after being reduced by outstanding letters of credit of $17.9 million.debt service requirements, capital expendituresbusiness needs, commitments and working capitalcontractual obligations for at least the next 12 months.Senior Secured Credit AgreementsOur Term Loan Agreement provides for a seven-year $300.0 million Term Loan. Our ABL Credit Agreement providesmonths as evidenced by our net positive cash flows from operations for the ABL Revolverthree and nine months ended September 30, 2022 and 2021. We believe that we have access to additional funds, if needed, through the capital markets to obtain further debt financing under the current market conditions, but we cannot guarantee that such financing will be available on favorable terms, or at all. In the short-term, we expect the seasonal trends we typically experience to vary from historical patterns, with the last quarter of up2022 and first half of 2023 experiencing stronger volumes than the second half of 2023 due to approximately $100.0 million with a sublimit upthe large industry backlog of projects either in process or authorized but not started. This could affect the timing of cash collections and payments during the fourth quarter of 2022 and each quarter of 2023.$50.0 million for the issuance of letters of credit, whichfund working capital needs and operating expenses, to meet principal and interest obligations on our long-term debts and finance leases as they become due or mature, and to make required income tax payments. Additional funds may be reducedspent on acquisitions, capital improvements and dividend payments, at our discretion.increased pursuantobtain further debt financing in the future to the ABL Credit Agreement. The borrowing baseextent that our sources of capital are insufficient.the ABL Revolver, which determines availability under the facility, is based onopportunities to reduce our working capital as a percentage of net revenue.Nine months ended September 30, 2022 2021 Net cash provided by operating activities $ 198,667 $ 116,478 Net cash used in investing activities (139,935) (121,609) Net cash used in financing activities (188,815) (34,954) valueresulting operating income generated by these revenues. Operating income is adjusted for certain non-cash items, and our cash flows from operations can be impacted by the timing of our cash collections on sales and collection of retainage amounts. The COVID-19 pandemic has not had a material impact on our cash collections to date.assets securingincreases in working capital requirements aimed at reducing material shortages in a supply constrained environment.the subsidiary guarantors under the ABL Credit Agreement.Proceedscertain of our subsidiaries (subject to certain exceptions) to: (i) incur additional debt and issue preferred stock; (ii) pay dividends on, redeem or repurchase stock in an aggregate amount exceeding 2.0% of market capitalization per fiscal year, or in an aggregate amount exceeding certain applicable restricted payment baskets; (iii) prepay subordinated debt; (iv) create liens; (v) make specified types of investments; (vi) apply net proceeds from the Senior Secured certain asset sales; (vii) engage in transactions with affiliates; (viii) merge, consolidate or sell substantially all of our assets; and (ix) pay dividends and make other distributions from subsidiaries. were used to repay in full all amounts outstandingCreditadministrative agent and Security Agreement.approximately $0.8$1.25 million starting on September 30, 2017,March 31, 2022, with any remaining unpaid balances due on April 15, 2024, which is the maturity date. Loans incurreddate of December 14, 2028. The Term Loan bears interest at either the base rate (which approximates the prime rate) or the Eurodollar rate, plus a margin of (A) 1.25% in the case of base rate loans or (B) 2.25% in the case of Eurodollar rate loans. Proceeds from the Term Loan were used to refinance and repay in full all amounts outstanding under our previous term loan agreement. We intend to use the ABL Revolver will have a final maturityremaining funds to pay for certain fees and expenses associated with the closing of April 13, 2022.pre-payments equal to prepayments of (i) 100% of the net cash proceeds from issuances or incurrence of debt by the Company or any of its restricted subsidiaries (other than with respect to certain permitted indebtedness (excluding any refinancing indebtedness); (ii) 100% (with step-downs to 50% and 0% based on achievement of specified net leverage ratios) of the net cash proceeds from certain sales or dispositions of assets by the Company or any of its restricted subsidiaries in excess of a certain amount and subject to customary reinvestment provisionsprovision and certain other expenses;exception; and (iii) 50% (with step-downs to 25% and 0% based upon achievement of specified net leverage ratios) of excess cash flow of the Company and its restricted subsidiaries in excess of $5.0$15.0 million, subject to customarycertain exceptions and limitations.LoansSenior Secured Credit Facilities bearasset-based lending credit facility (the “ABL Revolver”) to $250.0 million from $200.0 million, and permits us to further increase the commitment amount up to $300.0 million. The amendment also extends the maturity date from September 26, 2024 to February 17, 2027. The ABL Revolver bears interest based on, at the Company’s election, either the base rate or the Eurodollar rateSecured Overnight Financing Rate ("Term SOFR"), at our election, plus in each case, the Applicable Margin. The Applicable Margin in respecta margin of loans under (i) the Term Loan Agreement will be (A) 3.00% in the case of Eurodollar rate loans and (B) 2.00%0.25% or 0.50% in the case of base rate loans and (ii) the ABL Facility will be (A)or 1.25%, or 1.50% or 1.75% in thefor Term SOFR advances (in each case of Eurodollar rate loans (basedbased on a measure of availability under the ABL Facility)Credit Agreement). The amendment also allows for modification of specified fees dependent upon achieving certain sustainability targets, in addition to making other modifications to the ABL Credit Agreement. In connection with the Term Loan Agreement, we entered into a Third Amendment (the “Third Amendment”) to the ABL/Term Loan Intercreditor Agreement with Bank of America, N.A., as ABL Agent for the lenders under the ABL Credit Agreement, and (B) 0.25%, 0.50% or 0.75% inRoyal Bank of Canada as collateral agent under the caseTerm Loan Agreement. Including outstanding letters of base rate loans (based on a measure ofcredit, our remaining availability under the ABL Facility).In addition, we will pay customary commitment fees and letterRevolver as of credit feesSeptember 30, 2022 was $197.6 million.Credit Agreement. The commitment feesRevolver are guaranteed by all of the Company’s existing restricted subsidiaries and will vary based upon a measure of our utilizationbe guaranteed by the Company’s future restricted subsidiaries. Additionally, all obligations under the Term Loan and ABL Revolver.The Senior Secured Credit Agreements each containRevolver, and the guarantees of those obligations, are secured by substantially all of the assets of the Company and the guarantors, subject to certain exceptions and permitted liens, including a number of customary affirmative and negativenon-financial covenants, andfirst-priority security interest in such assets that constitute ABL Priority Collateral, as defined in the ABL Credit Agreement, and a second- priority security interest in such assets that constitute Term Loan Priority Collateral, as defined in the Term Loan Agreement.1.00 to 1.001.0x in the event that we do not meet a minimum measure of availability under the ABL Revolver. The ABL Credit Agreement and the Term Loan Agreement contain restrictive covenants that, among other things, limit the ability of the Company and certain of our subsidiaries (subject to certain exceptions) to: (i) incur additional debt and issue preferred stock; (ii) pay dividends on, redeem or repurchase stock in an aggregate amount exceeding the greater of 2.0% of market capitalization per fiscal year or certain applicable restricted payment basket amounts; (iii) prepay subordinated debt; (iv) create liens; (v) make specified types of investments; (vi) apply net proceeds from certain asset sales; (vii) engage in transactions with affiliates; (viii) merge, consolidate or sell substantially all of our assets; and (ix) pay dividends and make other distributions from subsidiaries. At September 30, 2017,2022, we were in compliance with all applicable covenants under the Term Loan Agreement, ABL Credit Agreement and the Senior Secured Credit Agreements.are party to a Master Loan and Security Agreement, a Master Equipment Lease Agreement and one or more Master Loan Agreementshave financing loan agreements with various lenders to provide financing for the purpose of purchasing or leasing vehicles and equipment used in the normal course of business. Each financing arrangement under these agreements constitutes a separate note and obligation. Vehicles and equipment purchased or leased under each financing arrangement serve as collateral for the note applicable to such financing arrangement. Regular payments are due under each note for a period of typically 60 consecutive months after the incurrence of the obligation. The specific terms of each note are based on specific criteria, including the type of vehicle or equipment and the market interest rates at the time. No termination date applies to these agreements.gross assetsoutstanding loan balances relating to our master loan and equipment agreements were $66.8 million and $48.7$69.4 million as of September 30, 20172022 and December 31, 2016, respectively, none of which were fully depreciated as of September 30, 2017 or December 31, 2016, respectively. The net book value of assets under these agreements was $47.3 million and $38.0$69.2 million as of September 30, 2017 and December 31, 2016,2021, respectively. Depreciation of assets held under these agreements is included within cost of sales on the Condensed Consolidated Statements of Operations and Comprehensive Income.use letters of credit to secure our performance under our general liability and workers’ compensation insurance programs. Our largest workers’ compensation insurance program is considered a high deductible program whereby we are responsible for the cost of claims under approximately $0.8 million. If we do not pay these claims, our workers’ compensation insurance carriers are required to make these payments to the claimants on our behalf. Effective with the plan year beginning October 1, 2015, our largest general liability insurance program is considered a high retention program whereby we are responsible for the cost of claims up to approximately $2.0 million, subject to an aggregate cap of $8.0 million. If we do not pay these claims, our general liability insurance carrier is required to make these payments to the claimants on our behalf. Prior to the claim year beginning October 1, 2015, our largest general liability insurance program has a self-insured retention (“SIR”) of $0.35 million whereby we continue to be responsible for all claims below the SIR and the insurance company continues to be responsible for all liabilities above the SIR. As of September 30, 2017, we had $17.9 million of outstanding letters of credit and $0.3 million in cash securing our performance under these insurance programs. We expect to increase the collateral for these programs by approximately $10.0 million during the fourth quarter of 2017.We occasionallymay use performance bonds to ensure completion of our work on certain larger customer contracts that can span several months. As of September 30, 2017, we had 56 performance bonds outstanding, totaling approximately $24.1 million. The acquisition of Alpha resulted in a significant increase in the level of contracts in the commercial end market, which typically require a greater value of performance bonds.multiple accounting periods. Performance bonds generally do not have stated expiration dates; rather, we are released from the bonds as the contractual performance is completed. AsIn addition, we occasionally use letters of September 30, 2017, we had 358 permitcredit and license bonds outstanding, totaling approximately $5.9 million.cash to secure our performance under our general liability, workers’ compensation and auto insurance programs. Permit and license bonds are typically issued for one year and are required by certain municipalities when we obtain licenses and permits to perform work in their jurisdictions.Financial InstrumentsInterest Rate DerivativesAs of September 30, 2022 Performance bonds $ 77,971 Insurance letters of credit and cash collateral 58,514 Permit and license bonds 9,420 Total bonds and letters of credit $ 145,905 various borrowing facilities which charge interest based on$4.3 million deposited into a trust as of September 30, 2022 to serve as additional collateral for our workers’ compensation, general liability and auto policies. This collateral is included in the one month U.S. dollar LIBOR rate plus an interest spread. On May 8, 2017, we entered into two interest rate swaps withtable above and can be converted to a notional amountletter of $100.0 million. During the second quartercredit at our discretion and is therefore not considered to be restricted cash.2017, we began to receive variable rate interest paymentsour financial condition and results of operations is based upon one month U.S. dollar LIBOR andour consolidated financial statements, which have been prepared in return were obligated to pay interest at a fixed rate of 1.9%. This effectively converted the borrowing rate on $100.0 million of debt from a variable rate to a fixed rate. These derivatives are designated as cash flow hedges foraccordance with accounting purposes. Accordingly, any effective portion of the unrealized gain or loss on these derivative instruments is reported as a component of other comprehensive income and reclassified into earningsprinciples generally accepted in the same line item associated withUnited States. The preparation of our consolidated financial statements requires us to make estimates and assumptions that affect the forecasted transactionsreported amounts of assets, liabilities, revenues and inexpenses and related disclosure of contingent assets and liabilities. Certain accounting policies involve judgments and uncertainties to such an extent that there is a reasonable likelihood that materially different amounts could have been reported using different assumptions or under different conditions. We evaluate our estimates and assumptions on a regular basis. We base our estimates on historical experience and various other assumptions that are believed to be reasonable under the same period duringcircumstances, the results of which form the hedged transactions affect earnings. Any ineffective portionbasis for making judgments about the carrying values of the gain or loss on the derivative instrument is recognized into earnings. For additional disclosures of the gain or loss included withour assets and liabilities that are not readily apparent from other comprehensive income, see Note 8, Derivativesources. Actual results may differ from these estimates and Hedging Activities, included in Item 1 of Part I of this Form10-Q. The assumptions used in measuring fair valuepreparation of the interest rate derivatives are considered level 2 inputs, which are based upon LIBOR and interest paid based upon a designated fixed rate over the life of the swap agreements.Historical cash flow informationCash flow from operating activitiesNet cash provided by operating activities of $53.3 million and $54.6 million for the nine months ended September 30, 2017 and 2016, respectively, consisted primarily of net income of $30.3 million and $27.4 million, respectively, adjusted fornon-cash and certain other items. Included in the net cash provided in 2017 werenon-cash adjustments for depreciation and amortization expense on our expanded base of property, plant and equipment to support our growth totaling $20.7 million as well as for amortization on our growing intangible asset base from acquisitions totaling $19.8 million. These increases were offset byconsolidated financial statements. There have been no significant changes to certain assetsour critical accounting policies and liabilities, excluding effects of acquisitions, most notably additional accounts receivable resulting from our growth and additional income tax receivables due to changes in estimated tax payments.Included in the net cash provided in 2016 werenon-cash adjustments for depreciation and amortization expense on our expanded base of property, plant and equipment to support our growth totaling $17.2 million as well as for amortization on our growing intangible asset base from acquisitions totaling $8.2 million. These increases were coupled with other changes in working capital, most notably $6.0 million of additional other liabilities primarily driven by higher accrued wages due to an increase in number of days in the pay cycle to accrue, a $4.7 million change in other assets due primarily to a reduction of various prepaid assets and other receivables and $3.9 million of additional accounts payable resulting from the increase in purchases to support our growth, offset by a reduction of cash of $17.9 million due to increased accounts receivable resulting from our growth.Cash flows from investing activitiesNet cash used in investing activities was $180.3 million and $55.1 million for the nine months ended September 30, 2017 and 2016, respectively. In 2017, we made cash payments, net of cash acquired, of $131.0 million on business combinations, $25.2 million on purchases of short-term investments and $22.9 million primarily to purchase fleet to support our growing business.In 2016, we made cash payments, net of cash acquired, of $36.4 million on business combinations and $19.2 million primarily to purchase fleet to support our growing business.Cash flows from financing activitiesNet cash provided by financing activities was $179.5 million and $12.7 million for the nine months ended September 30, 2017 and 2016, respectively. Net cash provided in 2017 was primarily due to net proceeds of $190.5 million from our current and prior credit agreements to support continuing acquisitions and $15.8 million of proceeds from notes payable to finance our vehicle purchases. This increase in cash was offset by $8.2 million in debt issuance costs, $7.2 million in principal payments on other long term debt, $5.6 million in principal payments on capital lease obligations and $3.4 million in principal payments on acquisition-related obligations.Net cash provided in 2016 was primarily due to net proceeds of $11.9 million as a result of amending our credit agreement, resulting in increased borrowing capacity to support operations and continuing acquisitions and $16.3 million of proceeds from notes payable to finance our vehicle purchases. This increase in cash was offset by $6.6 million in principal payments on capital lease obligations, $1.2 million in costs related to amending our credit agreement and $4.1 million in principal payments on other long term debt.Capital expendituresCapital expenditures vary depending on prevailing business factors, including current and anticipated market conditions. Total capital expenditures, including unpaid purchases as of each balance sheet date, were $23.3 million and $21.3 million for the nine months ended September 30, 2017 and 2016, respectively, and primarily related to purchases of vehicles and various equipment to support our operations and increased net revenue. We finance a significant portion of our capital expenditures under the Master Loan and Security Agreement, the Master Equipment Agreement or the Master Loan Agreement, which allow us to benefit from depreciation for tax purposes. These arrangements require us to pay cash up front for vehicles and equipment. We are reimbursed for the upfront cash payments after the assets are financed under the agreements. Of the $23.3 million in capital expendituresestimates during the nine months ended September 30, 2017, $15.8 million was converted to a financing arrangement by September 30, 2017 under2022 from those disclosed in the Master Loan“Management’s Discussion and Security Agreement, Master Equipment AgreementAnalysis of Financial Condition and one or more Master Loan Agreements.Capped Call AgreementCertainResults of Operations” section of our stockholders entered into2021 Form 10-K.capped call agreement with the underwritersdescription of the secondary offering ofrecently issued and/or adopted accounting pronouncements, see Note 2, Significant Accounting Policies, to our common stock completed on June 17, 2014. This agreement provided these stockholders with an option to call from the underwriters a total of approximately 1.0 million shares of our common stock at a capped price, with settlement required to be made in cash. During 2016, these stockholders exercised the call option with respect to approximately 0.7 million of the shares. In addition, in the fourth quarter of 2016, these stockholders simultaneously cancelled the remaining portion of the call option and purchased a new call option from the underwriters. This new capped call agreement provides these stockholders with the option to call from the underwriters a total of approximately 0.4 million shares of our common stock at a capped price. The option becomes exercisable and expires on April 16, 2018 and will be settled in cash. The capped call agreement is between these stockholders and the underwriters and does not represent compensation to the stockholders for services rendered to us. The price paid for the option represents the fair value of that transaction and we are not a party to the agreement. Accordingly, we have not recorded any expense related to this transaction.Contractual ObligationsOur enforceable and legally binding obligations as of September 30, 2017,audited consolidated financial statements included in the table below are based2021 10-K.management’s estimates and assumptions about these obligations, including their duration, the possibility of renewal, anticipated actions by third parties and other factors. Because these estimates and assumptions are necessarily subjective, our actual payments may vary from those reflected in the table: Payments due by year (1) Total Remainder of
2017 2018 2019 2020 2021 Thereafter $ 433,469 $ 7,274 $ 29,347 $ 28,917 $ 27,482 $ 21,678 $ 318,771 14,786 2,017 6,128 4,229 1,606 806 — 40,246 3,442 12,319 9,856 6,594 3,370 4,665 (1)Our unrecognized tax benefits under ASC 740, “Income Taxes,” have been excluded from the table because of the inherent uncertainty and the inability to reasonably estimate the timing of cash outflows.(2)Long-term debt obligations include principal and interest payments on our Term Loan Agreement and ABL Credit Agreement as well as our notes payable to sellers of acquisitions and vehicles purchased under the Master Loan and Security Agreement, the Master Equipment Agreement and the Master Loan Agreements. Long-term debt obligations do not include commitment fees on the unused portion of the ABL Revolver since these fees are subject to change based on the factors described in our Credit and Security Agreement. Interest on seller obligations maturing through March 2025 is estimated using current market rates. See Item 1, Financial Statements, Note 5, Long-Term Debt, for information on our vehicle and equipment notes.(3)We maintain certain production vehicles under a capital lease structure. The leases expire on various dates through November 2021. Capital lease obligations, as disclosed above, include estimated interest expense payments. In determining expected interest expense payments, we utilize the rates embedded in the lease documentation.(4)We lease certain locations, vehicles and equipment under operating lease agreements, including, but not limited to, corporate offices, branch locations and various office and operating equipment. In some instances, these location lease agreements exist with related parties. See Item 1, Financial Statements, Note 11, Related Party Transactions, for further information.Off-Balance Sheet ArrangementsAs of September 30, 2017, other than operating leases and purchase obligations described above, letters of credit issued under the ABL Revolver and performance and license bonds, we had no materialoff-balance sheet arrangements.Critical Accounting Policies and EstimatesThere have been no material changes for the three months ended September 30, 2017 from the critical accounting policies and estimates as previously disclosed in our 2016 Form10-K and in our Form10-Q for the three months ended March 31, 2017 and June 30, 2017, except in the area of share-based compensation as described below:Share-Based CompensationOur share-based compensation program is designed to attract and retain employees while also aligning employees’ interests with the interests of our stockholders. Restricted stock awards are periodically granted to certain employees, officers andnon-employee members of our board of directors under the stockholder-approved 2014 Omnibus Incentive Plan.Equity-based awards: Certain of our stock awards are deemed to be equity-based with a service condition and do not contain a market or performance condition with the exception of performance-based awards granted to certain officers and performance-based restricted stock units. Fair value of thenon-performance-based awards to employees and officers is measured at the grant date and amortized to expense over the vesting period of the awards using the straight-line attribution method for all service-based awards with a graded vesting feature. This fair value is reduced by assumed forfeitures and adjusted for actual forfeitures until vesting. We also issue performance stock-based awards to certain officers under our 2014 Omnibus Incentive Plan. The performance-based compensation expense is recorded over the requisite service period using the graded-vesting method for the entire award. Performance-based stock awards are accounted for at fair value at date of grant. We also periodically grant restricted stock units to certain employees under the stockholder-approved 2014 Omnibus Incentive Plan. These units convert to shares upon meeting time- and performance-based requirements.Liability-based awards:Certain of our stock awards represent a predominately-fixed monetary amount that is to be settled with a variable number of shares. These awards contain both time and performance requirements, and are deemed to be liability-based, which requires that were-measure to reflect the fair value at the end of each reporting period. The change in fair value each reporting period is recorded as compensation cost, with a corresponding increase or decrease in the share-based liability, either immediately or over the remaining service period depending on the vested status of the award.Compensation expense for both equity and liability-based restricted stock units is recorded based on an assessment each reporting period of the probability that certain performance goals will be met during the contingent vesting period. If performance goals are not probable of occurrence, no compensation expense will be recognized. If performance goals that were previously deemed probable are not or are not expected to be met, the previously recognized compensation cost related to such performance goals will be reversed. Employees and officers are subject to tax at the vesting date based on the market price of the shares on that date, or on the grant date if an election is made.Forward-Looking StatementsThis report contains forward-looking statements within the meaning of the federal securities laws, including with respect to the housing market and the commercial market, economic and industry conditions, our financial and business model, payments of dividends, the impact of COVID-19 on our business and end markets, the demand for our services our financial model,and product offerings, trends in the commercial business, expansion of our national footprint and end markets, diversification of our products, our ability to capitalize on the new home construction recovery, our ability togrow and strengthen our market position, our ability to pursue and integrate value-enhancing acquisitions, our ability to improve sales and profitability, our efforts to navigate the material pricing environment, our ability to increase selling prices, our material and labor costs, supply chain and material constraints, the impact of COVID-19 on our financial results and expectations for future demand for our services.services and our earnings in 2022. Forward-looking statements may generally be identified by the use of words such as “anticipate,” “believe,” “estimate,” “project,” “predict,” “possible,” “forecast,” “may,” “could,” “would,” “should,” “expect,” “intends,” “plan,” and “will” or, in each case, their negative, or other variations or comparable terminology. These forward-looking statements include all matters that are not historical facts. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. Any forward-looking statements that we make herein and in any future reports and statements are not guarantees of future performance, and actual results may differ materially from those expressed in or suggested by such forward-looking statements as a result of various factors, including, without limitation, the duration, effect and severity of the COVID-19 crisis; the adverse impact of the COVID-19 crisis on our business and financial results, our supply chain, the economy and the markets we serve; general economic and industry conditions; increases in mortgage interest rates and rising home prices; inflation and interest rates; the material price and supply environment; the timing of increases in our selling prices; the risk that the Company may reduce, suspend or eliminate dividend payments in the future; and the factors discussed in the “Risk Factors” section of our 20162021 Annual Report on Form10-K and this Quarterly Report on Form 10-Q, as the same may be updated from time to time in our subsequent filings with the SEC. In addition, any future declaration of dividends will be subject to the final determination of our Board of Directors. Any forward-looking statement made by the Company in this report speaks only as of the date hereof. New risks and uncertainties arise from time to time and it is impossible for the Company to predict these events or how they may affect it. The Company has no obligation, and does not intend, to update any forward-looking statements after the date hereof, except as required by federal securities laws.
There have been no material changes to our exposurerisk since December 31, 2016.risks related to fluctuations in interest rates on our outstanding variable rate debt. As of September 30, 2022, we had $496.3 million outstanding on our Term Loan, gross of unamortized debt issuance costs, no outstanding borrowings on our ABL Revolver and no outstanding borrowings under finance leases subject to variable interest rates. As of September 30, 2022, we had three active and two forward interest rate swaps which, when combined, serve to hedge $400.0 million of the variable cash flows on our Term Loan until its maturity unless extended. As a result, total variable rate debt of $96.3 million was exposed to market risks as of September 30, 2022. A hypothetical one percentage point increase (decrease) in interest rates on our variable rate debt would increase (decrease) our annual interest expense by approximately $1.0 million. Our Senior Notes accrue interest at a fixed rate of 5.75%.
2022. We have not experienced any material impact to our internal controls over financial reporting despite the fact that some of the employees at our corporate office are working remotely at times due to the COVID-19 pandemic.2017.20172022 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
12,16, Commitments and Contingencies – Other Commitments and Contingencies, for information about existing legal proceedings.
Therefor the three months ended September 30, 2017 from the risk factors as disclosed in our 20162021 Form10-K.
None. Total Number
of Shares
PurchasedAverage
Price Paid
Per ShareTotal Number of Shares Purchased as Part of Publicly Announced Plans or Programs July 1 - July 30, 2022 — $ — — $ — 51 98.94 — — September 1 - September 30, 2022 141,932 88.27 141,932 187.5 million 141,983 $ 88.27 141,932 $ 187.5 million
Description ExhibitNumberDescription 31.1 31.2 32.1 32.2101 (a)statementsStatements.104** Cover Page Interactive Data File (formatted in Inline XBRL Formatand contained in Exhibit 101). of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.6, 20173, 2022INSTALLED BUILDING PRODUCTS, INC. By: /s/ Jeffrey W. Edwards Jeffrey W. Edwards President and Chief Executive Officer By: /s/ Michael T. Miller Michael T. Miller Executive Vice President and Chief Financial Officer
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